HF 

2611 

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LIBRARY 

UNIVERSITY  OF 

CAUPORNiA 
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iHt  Ui ..!(Y  LIbUAKI 

tJN^VCRSnY  CF  L;,.iFORNiA;  SAN  OlEGO 
LA  JCLLA.  CALIFORNIA  -^ 

TARIFF  AND  WAGES. 


PAUL   AND    HIS    FATHER    HAVE   A   DIALOGUE 
DISCUSSION  OF  THESE  VITAL  QUESTIONS. 


How  Far  and  on  What  Basis  a  Protective 
Policy  is  Justifiable. 


RELATION   r.ETWEEN   PRdTECTtON  AND   PRODUCTION 
AND   PRODUCTION   AND   WAGES. 


IF  A  PROTECTIVE  TARIFF  DEVEI.dl'S  PRODUCTIVE  POWER,   IT 
DEVELOPS  THE  SOLKCE  OF  WAGES. 


By  GEORGE    W.   ELLIOTT,  A.  M. 


BUFFALO,  N.  Y. : 
MOULTON,     WENBORNE    AND    COMPANY. 

1888. 


COI'VNK.HT,    lS8o, 
11 V 

GEORGE   W.  ELLIOTT. 


v.  "" 


t 


T 


TO 

H.   H.   AVARNER, 

OF  Rochester,  N.  Y., 
WHO  LAID  THE  FOUNDATIONS  OF   HIS  FORTUNE  IN  A  STANDARD 
TRADE,     THUS    ILLUSTRATING    THE    ADVANTAGES    AND 
AWARDS  OF   LIFE   UNDER   THE  AMERICAN  COM- 
MERCIAL Policy,  who  has  ever  been 

ONE     OF    the    most    LIBERAL    PATRONS    OF    WAGES    EARNERS, 

and  an  ardent  advocate  of  the  american 
Protective  Policy, 

^te  Q^ooft  IB  ©ebtcafeb, 

WITH   THE    PERSONAL    REGARD   OF 

Rochester,  N.  Y.,  June  25,  1888.  THE  AUTHOR. 


NOTE. 

Moulton,  Wenborne  &  Co.,  Buffalo,  N.  Y.,  have  just  published 
"  Tariff  and  Wages,"  by  Geo.  W.  Elliott,  of  Rochester,  N.  Y.  Mr. 
Elliott  has  had,  as  manager  of  advertising  and  publications  of  the 
immensely  successful  house  of  H.  H.  Warner  &  Co.,  who  have  branches 
all  over  the  globe,  unusual  advantages  in  the  study  of  international 
trade  policies.  He  withdrew  from  active  journalism  ten  years  ago  for 
the  purpose  of  making  a  study  of  trade  problems.  He  was  originally  a 
freetrader,  and  is  one  now  theoretically,  but  he  believes,  as  an  Ameri- 
can, one  must  sustain  a  genuine  protective  tariff  policy.  He  treats  his 
theme  in  dialogue  manner  with  his  son  Paul,  and  makes  a  book  so 
simple  that  the  perplexing  problems  ol  the  taritf  can  be  readily  under- 
stood by  the  wage-worker.  He  holds  that  there  is  no  such  thing  as  a 
fixed  wages  fund  apart  from  protection,  which  is  the  source  of  all  wages. 
He  shows  that  protection  does  foster  production  in  many  respects  that 
would  not  obtain  were  we  in  open  competition  with  free  trade  England, 
and  hence  protected  production,  by  furnishing  diversity  of  employments, 
maintains  a  better  rate  of  wages  than  could  prevail  were  varieties  of 
employments  less  numerous  and  were  more  labor  forced  into  agricultural 
pursuits. 


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CONTENTS. 


I'AGE. 

TiiF.  Author's  iNTRDorcTioN,  ....  vii 

PART    FIRST. 

CHAPTER. 

I.     The  True   Theory  of  Protection-,        .         .         g 
II.     TirE    Limitations   of  the   Theory   of    Pro- 
tection, ......  2f) 

III.  When   Money  Saved  in  Foreign   Contracts 

IS  a  Loss, 34 

IV.  The  Evils  of  Over-Protection,         .         .  40 
V.     The  Problem  of  Over-Production,       .         .       47 

VI.     What  is  Money  and  Wh.\t  Money  is  Not,  52 

VII.     The  Modern  Colossus  of  Trust,  .         .       56 

PART   SECOND. 

WAGES. 

VIII.     Wages 60 

IX.     The  Doctrine  of  a  Fixed  Wages  Fund,  .       66 

X.     What  is  Meant  by  Dlminishlng  Returns,  71 

XI.     The  Two  Theories  Demonstrated,       .  .       81 

I.     Wages,    According    to    the   Wages    Fund 
Theokv,  Independent  of  Production. 
II.     Wages  as  Dependent  on  Productio.v. 

XII.     The  Tariff,  Subsidies  and  Bou.nties,        .  85 

PART   THIRD. 

CAPITAL,     LABOR,     STRIKES,     ARBITRATION,     PROFIT 
SHARING,    ETC.,    ETC. 

XIII.     Relations  Between  Capital  and  Labor,       .       91 

XI\^     Labor  and  Capital  Shari.ng  Profits,         .         102 

XV.     Comparative  Statistics,         ....     106 


IN  TROD  UCTION. 


While  as  a  theoretical  free  trader  I  cannot  justify 
an  exorbitant  tariff,  I  do  believe  in  a  judicious  tariff, 
and  in  the  pages  which  follow  I  have  tried  as  simply 
as  possible  to  explain  in  homelike  conversation  some 
of  the  reasons  why  a  properly  regulated  protective 
tariff  is  justifiable  from  an  American  point  of  view. 
I  recognize  it  as  a  policy,  not  as  a  principle  of 
universal  application,  and  admit  that  while  it  may 
be  justifiable  as  a  policy  for  the  United  States,  it 
may  not  in  the  present  state  of  her  development, 
be  the  best  economic  policy  for  Great  Britain. 

I  hold  that  wages  begins  and  ends  in  production, 
dissenting  emphatically  from  the  theory  that  there 
is  such  a  thing  as  a  fixed  wages  fund  apart  from 
production.  If  the  former  theory  prevails,  there 
is  a  universal  stimulus  to  an  increase  of  production ; 
if  the  latter  be  true  there  must  be  constantly  a 
tendency  to  restrict  the  number  of  workmen  so  that 
each  one  may  have  a  larger  part  of  this  so  called 
fixed  fund.  Under  one  theory  there  must  be,  other 
conditions  being  favorable,  a  vast  increase  of  pros- 
perity; under  the  latter,  a  constant  repression  of 
production  with  consequent  stunting  of  growth. 

I  admit  that  a  protective  tariff  is  an  apparent 
taxation  of  the  many  for  the  seeming   benefit  of 


viii  INTRODUCTION. 

the  few,  but  show  that  in  reality,  under  a  properly 
regulated  tariff,  the  benefits  derived  by  the  many 
are  greater  than  those  derived  by  the  few  and 
exceed  by  many  fold,  in  the  long  run,  the  general 
taxation  imposed  by  a  protective  tariff. 

I  do  not  discuss  individual  cases.  I  try  to  con- 
fine myself  to  the  general  principles  of  the  policies 
under  examination,  and  to  state  principles  briefly 
without  extended  elaboration.  I  do  not  believe  that 
a  protective  policy  is  justifiable  simply  on  the 
ground  that  it  maintains  what  is  called  the  high 
rate  of  American  wages, — that  is  merely  one  of  the 
many  general  benefits  which  it  distributes  among 
the  masses  and  is  an  argument  against  the  theory 
that  a  protective  tariff  is  ' '  taxation  of  the  many  for 
the  benefit  of  the  few."  Whatever  helps  to  dis- 
tribute the  profits  of  production  among  the  greatest 
number  of  people  is  a  salutary  anti-socialism  tonic. 

The  papers  forming  the  chapters  of  this  little 
book  were  first  written  in  1885,  and  published 
serially  in  the  American  Rural  Home  of  Rochester, 
N.  Y.  They  have  been  rearranged  and  extended 
and  are  published  in  this  form  in  the  hope  that 
they  will  attract  the  interest  of  young  men,  on 
whose  clear  understanding  of  the  simple  principles 
of  the  questions  now  so  generally  absorbing  the 
attention  of  the  American  people  so  much  of  our 
political  future  depends. 

Rochester,  N.  Y.,  June  25,  1888. 


PART    I. 

CHAPTER   I. 

THE  TRUE  THEORY  OF  PROTECTION. 

Natural  Law  does  not  Prevail  in  the  Commercial 
World  —  A  Theoretical  Free  Trader,  as  an  Ameri- 
can IS  A  Protectionist  from  Force  of  Circumstances 
—  Selfishness  the  Law  of  the  Commercial  World  — 
Human  Institutions  developed  by  individual  Self- 
sacrifice —  A  Protective  Policy,  based  on  mutual 
Self-sacrifice,  for  the  Greatest  Good  of  the  Na- 
tional Community  is  Justifiable  —  The  Growth  of 
Society,  the  Development  of  Trade  and  Manufac- 
tures, AND  the  Demand  for  Protection — Limitations. 


Scene:  Sitting-room  of  a  thoughtful^  studious  far- 
mer.  Paul,  the  son,  having  been  graduated  from 
college  where  he  has  been  filled  tvith  unqualified 
free  trade  notions. 

Paul:  Father,  I  heard  a  man  in  the  post-office 
department  at  Washington  talking  very  excitedly 
with  another  gentleman  last  week  and  he  emphati- 
cally exclaimed:  "I  tell  you  sir  that  free  trade  is 
natural,  protection  is  artificial  and  should  be 
condemned  by  all  intelligent  people. "  Is  free  trade 
"natural"  and  is  protection  a  restricting  of  what 
may  be  called  natural  laws  of  trade? 

Father:  Well,  my  son,  your  questions  are 
rather  sweeping  but  both  can  be  answered  with 
Yes. 


lo  TARIFF  AND    WAGES. 

Paul:  Then  why  hamper  so-called  natural  laws 
with  human  restrictions? 

Father:  With  true  Yankee  characteristic,  Paul, 
I  will  answer  your  question  by  asking  others: 

Is  land  free? 

Paul:     No,  sir. 

Father:     Is  water  free? 

Paul:     No,  sir. 

Father:     Are  human  impulses  free? 

Paul:     No  sir,  not  among  civilized  people. 

Father:     Is  bread  free? 

Paul:  No,  not  bread  but  many  fruits  and 
forms  of  food  are  free. 

Father:     Entirely  and  universally? 

Paul:     Perhaps  not. 

Father:  Can  one  do  as  he  pleases  even  under 
the  freest  democracy? 

Paul:     No,  I  think  not. 

Father:  Are  political  actions  free  from  the 
control  of  law? 

Paul:     No,  sir. 

Father:  Are  religious  impulses  free  from  legal 
limitations? 

Paul:     No,  sir. 

Father:  Are  social  impulses  free  from  the 
restraints  of  law  and  custom? 

Paul:     No,  sir. 

Father:  Are  commercial  affairs  exempt  from 
the  restrictions  of  law? 


TARIFF  AND   WAGES.  ii 

Paul:     No,  sir. 

Father:  Is  it  not  true  then  that  almost  nothitig 
is  exempt  from  restrictions  imposed  by  tlie  selfishness, 
by  the  mutual  interests  and  self-sacrifices  or  by  the  self- 
defensiveness  of  cojumunitiesl 

Paul:  Well,  sir,  your  questions  are  pretty  hard 
for  me  to  combat  but  it  would  seem  as  if  you  were 
right. 

Father:  Well,  my  son,  the  existing  restric- 
tions are  imposed  as  the  result  of  human  experi- 
ence and  though  perhaps  some  of  the  restrictions 
are  too  stringent  sometimes  and  too  long  enforced 
occasionally,  in  the  main  they  are  wholesome  and 
necessary.  Free  trade,  as  the  gentleman  so  em- 
phatically observed,  may  be  "natural"  but  it 
does  not  follow  therefore  that  it  is  best  for  every 
people  under  all  and  any  circumstances.  On  the 
contrary  free  trade,  in  the  present  state  of  society,  is 
more  an  end  to  be  reached  by  processes  of  growth  and 
preparation  than  it  is  a  condition  precedent  to  growth 
and  commercial  perfection. 

Paul:  Don't  you  think  that  the  world  would 
be  better  off  commercially  if  there  had  never  been 
any  restrictions  on  trade? 

Father:  A  rather  extensive  question,  my  son, 
which  might  require  volumes  for  a  complete  answer, 
but  I  may  say  that  a  protective  tariff  has  been  the 
rule, — that  selfishness  is  the  mainspring  of  all  com- 
mercial enterprises,   a?id  that  a  tariff  is  a  true  out- 


12  TARIFF  AND   WAGES. 

growth  of  human  selfishness.  It  is  therefore  an 
open  question  if  the  world  would  have  been  as 
well  off — that  is  to  say,  if  as  satisfactory  conditions 
would  have  been  as  well  distributed  as  they  now 
are  —  had  there  never  been  any  artificial  restraints 
on  trade.  It  also  seems  to  be  a  law  XhdX  progress 
is  from  a  tariff  more  or  less  high  tinto  free  trade. 

Paul:  Then  why  not  help  along  the  car  of 
progress  by  at  once  urging  the  free  trade  theory? 

Father:     Understand    me,    my    son,    I    am 

THEORETICALLY  A  FrEE  TrADER  but  PRACTICALLY, 

as  an  American,  giving  full  consideration  to  onr  com- 
mercial a7id  industrial  circumstances.,  I  MUST  be 
AND  AM  A  Protectionist.  Free  trade  is  the 
keystone  of  the  arch  of  commercial  development, 
and  you  must  raise  your  arch  before  the  keystone  can 
be  set  ifito  its  place. 

Paul:  According  to  your  theory,  father,  only 
the  oldest  and  best-equipped  commercial  powers 
can  be  free  traders. 

Father  :  In  general  terms  that  is  my  belief, 
unless  the  whole  world  practices  free  trade. 

Paul:  If  that  is  the  fact  you  have  the  floor, 
father,  for  a  full  explanation  of  your  theory. 

SOCIETY    results     FROM    SELF-SACRIFICE. 

Father:     Very  well,  my  son  ;  now  for  my  ideas. 

Society  is    an   association  of    men    who    obtain 

by  mutual  self-sacrifice  what  would  otherwise  be 


TARIFF  AND    WAGES.  13 

unattainable  by  the  mass.  From  a  politico- 
economical  standpoint  society  can  exist  only  on 
the  basis  of  self-sacrifice  for  the  greatest  good  of  the 
greatest  number.  There  are  very  many  ways  in 
which  individual  concessions  make  for  the  public 
good  and  no  argument  is  needed  to  emphasize  the 
importance  of  such  concessions.  Society  is  neces- 
sarily a  curb.  It  is  a  hedging  about  of  individual 
impulse  by  public  will.  The  liberty  it  affords  is  in 
the  direction  of  those  things  which  the  public  will 
has  determined  are  for  the  best  interests  of  the 
greatest  number  of  people,  and  this  liberty,  its 
amount  and  kind,  depends  upon  the  widest  intelli- 
gence for  determining  what  shall  be  the  public  will. 
Society,  furthermore,  may  be  described  as  diver- 
sity in  lenity.  That  is  to  say,  there  are  all  sorts 
of  men  and  interests  concerned  in  the  formation  of 
society  and  the  greater  the  diversity  of  mutually 
harmonious  interests  and  the  stronger  the  economic 
unity  the  more  advanced  and  prosperous,  as  a  rule, 
will  the  society  be. 

THE    GROWTH    OF     SOCIETY. 

Take,  for  instance,  one  hundred  families  first 
landed  and  settled  in  rude  cabins  in  a  new  and 
strange  country.  Fertile  Land  abounds  on  every 
side  and  willing  Labor  pays  hopeful  homage  to  its 
generous  patron.  Agriculture — productive  labor 
on  land — is  the  basis  of  all  wealth  and    in   a  new 


14  TARIFF  AND    WAGES. 

community  most  of  the  people  become  agricultur- 
ists from  necessity.  In  a  few  years  if  prosperity 
attends  them  the  labor  spent  upon  the  land  yields 
more  than  the  necessities  of  life  call  for,  and  then  the 
people  are  able  to  exchange  their  surplus,  if  trans- 
portation means  be  at  hand,  with  older  communi- 
ties, getting  in  return  therefor  better  articles  of 
household  comfort,  better  clothes,  better  homes, 
richer  carpets,  libraries,  papers,  than  they  could 
produce. 

With  increase  of  the  products  of  labor  comes 
the  desire  for  a  betterment  of  the  condition.  The 
sons  and  daughters  of  the  farmer  are  given  an  educa- 
tion, and  to  the  gratification  of  their  parents 
seem  qualified  by  natural  and  rudely-cultivated 
gifts  to  excel  as  mechanics,  artisans,  musicians. 
They  return  from  school  to  the  farm  but  they  find 
farm  life  both  irksome  and  uncongenial.  Bear  in 
mind  that  at  this  time  nearly  every  one  is  a  farmer, 
and,  indeed,  the  tilling  of  the  soil  is  the  only  means 
open  for  the  gaining  of  a  livelihood. 

DEVELOPMENT  OF  TRADE  AND  MONEY. 

What  now  is  most  needed  in  order  to  introduce 
that  diversity  of  employments  and  vocations  so 
essential  to  a  substantial  society?  It  is  as  impossible 
that  all  can  be  farmers  as  that  all  can  be  preachers, 
or  artists,  or  lawyers,  or  merchants  or  mechanics. 
Natural    and  cultivated    ingenuity  gives  one  man 


TARIFF  AND   WAGES.  15 

excellence  in  some  one  branch  of  rude  manufacture, 
and  eventually  we  find  him  depending  for  his  living 
on  what  he  can  gain  in  grain  from  the  farmer  in 
exchange  for  his  products  of  the  soil,  or  for  the 
mechanism  of  his  hands.  This  is  Barter — an 
exchange  of  commodities  for  other  commodities.    ' 

Eventually  some  go-ahead  wandering  sort  of 
Arab  discovers  precious  metals  and  in  the  course 
of  commercial  evolution  this  metal  is  run  into 
what  is  called  Money;  then  the  mechanic  in  deal- 
ing with  the  farmer  does  so  not  directly  face  to 
face  but  he  takes  his  wares  to  a  third  party  who 
rewards  him,  not  in  wheat,  corn,  and  oil,  but  in 
this  article  called  "money."  It,  too,  is  a  com- 
modity—  the  product  of  labor  expended  on 
land — but  it  is  more  convenient  than  wheat,  corn 
and  oil  because  it  can  readily  and  universally  be 
exchanged  not  only  for  wheat,  corn,  and  oil,  but 
for  clothing,  shoes,  "gospel  privileges,"  and  other 
necessities  and  luxuries  of  body  and  soul. 

The  merchant  originally  exchanged  commodity 
for  commodity  but  when  valuable  metals  were  pro- 
duced and,  of  certain  size,  fineness  and  weight, 
became  a  measure  of  value,  it  is  plain  that  the  value 
of  all  exchangeable  articles  in  a  community  could  be 
rendered  to  buyers  and  sellers  much  better  by 
means  of  this  metal  than  by  trading  wheat  for 
corn,  or  corn  for  oil,  etc.  That  is,  if  wheat  equals 
X.  and  corn  equals   X.,  X.  could  always  command 


1 6  TARIFF  AND   WAGES. 

at  the  will  of  the  one  having  it  whatever  of  wheat 
and  corn  might  be  wanted. 

In  this  way  what  we  now  call  "  money  "  became 
both  an  alphabet  for  the  expression  of  what  vari- 
ous producers  wanted  for  their  products,  and 
what  those  products  thus  "price-marked"  were 
really  worth  in  other  commodities — in  other  words, 
money  became  a  measure  of  commercial  values  ajid  a 
medium  through  which  products  tvere  exchanged. 

THE    MERCHANT    CLASS. 

With  the  introduction  of  "  money  "  into  society 
sprang  up  what  we  call  the  middleman — the  one 
who  takes  in  wheat,  corn,  oil,  etc.,  from  Tom, 
Dick  and  Harry,  giving  them  money  therefor,  and 
disposes  of  them  to  others,  taking  money  or  its 
equivalent  in  exchange.  This  middleman  is  the 
grocer,  dry  goods  dealer,  marketman — Merchants. 

Now  our  primitive  society  originally  composed 
of  soil  tillers  has  developed  the  mechanic  and  the 
merchant.  In  the  same  evolutionary  manner,  out  of 
the  necessities  of  the  developing  civilization  come 
with  proper  encouragement  all  the  other  divisions 
of  labor  and  diversities  of  employments  until  finally 
7ve  have  that  variety  in  miity  which  is  so  essential  to  a 
prosperous  society. 

SELF-SACRIFICE TAXES. 

With  constantly  growing  development  the  county 
is  divided  into  towns,  the   town  develops  into  the 


TARIFF  AND   WAGES.  17 

village,  the  village  into  the  city ;  then  for  the  com- 
mon defense  and  protection  come  sanitary  improve- 
ments, good  roads,  well-graded  schools,  public 
parks,  gas,  water,  sidewalks,  fire  and  police  watch- 
care;  every  property-owning  citizen  sacrificing  a 
certain  amount  of  his  income  which  he  deposits  in 
the  common  treasury  for  the  greatest  good  of  the 
greatest  number. 

The  element  of  self-sacrifice  etiters  into  commercial 
relations  as  soon  as  barter  commences.  When  the 
merchant  is  developed  each  producer  apparently 
sacrifices  a  little  and  is  willing  thus  to  do  because 
he  appreciates  the  convenience  of  a  middleman  in 
the  transaction  of  business.  He  makes  this  self- 
sacrifice  unwillingly  at  first  because  he  thinks  that 
he  could  just  as  well  as  not  save  what  the  middleman 
makes  for  acting  as  the  intermediary,  but  a  little 
experience  teaches  him  that  in  the  end  he  gains 
more  by  using  the  middleman's  skill  and  special 
training  than  he  would  by  ignoring  them.  Like- 
wise, equitable  taxes  judiciously  expended,  he 
learns  by  experience  are  a  blessing  and  they  are  at 
length  willingly  paid  though  they  never  reticrn  to  him 
in  kind. 

DEVELOPMENT    OF  CAPITAL. 

By  and  by  as  a  result  of  prosperous  labor  and 
a  fertile  soil  there  is  an  accummulation  of  money 
in  the  community — Capital  it  is  called,  the  surplus 
or  unconsumed  product  of   labor  on  land.     This  is 


1 8  TARIFF  AND    WAGES. 

laid  by  and  they  who  possess  it  seek  opportunities 
so  to  employ  it  that  it  shall  return  them  an  increase 
— Interest.  But  opportunities  are  scarce.  Abund- 
ance of  unemployed  capital  is  not  a  blessing.  In 
many  cases  they  who  have  this  accumulation  are 
too  old  or  are  otherwise  unfitted  for  manual  toil 
and  unless  they  can  invest  this  capital  so  that  it  will 
return  a  revenue,  they  will  soon  consume  it  and 
become  dependent  upon  the  public.  Capital  like 
land  is  valuable  only  as  it  is  productive.  But  the 
resources  of  the  community  have  been  devoted 
chiefly  to  grain  raising  and  the  rude  manufacture 
of  what  is  needed  by  the  people  of  the  community. 
With  its  greater  development  better  things  are 
wanted.  Coal  and  iron  are  discovered  and  there 
is  a  desire  to  establish  a  foundry  and  a  plow  works. 

One  hundred  thousand  dollars  are  raised  and  oper- 
ations are  begun.  In  a  few  years  every  cent  is  lost 
for  other  and  older  communities  richer  in  men  and 
means  capital  and  skill,  and  having  cheaper  as  well 
as  better  labor  have  been  able  to  produce  iron 
manufactures  cheaper  and  better  than  they  can  be 
made  in  our  young  community,  and  the  venture  is 
a  failure! 

What  shall  be  done? 

A    PUBLIC     MEETING. 

Must  wc  always  be  tillers  of  the  soil?  Is  there 
not  some  new  form  of  self-sacrifice  that  we  can  make 


TARIFF  AND    WAGES.  19 

for  the  greatest  good  of  the  greatest  number?  Is 
it  possible  that  wc  cannot  develop  and  maintain  a  Iionie 
market  ? 

A  pubhc  meeting  to  discuss  ways  and  means  is 
called,  and  is  largely  attended.  John  Gooddeed 
makes  the  following  address  to  the  interested  audi- 
ence: 

THE  TRUE  THEORY  OF  PROTECTION. 

Fellow  Citizens:  I  am  a  married  man.  I  have  a 
thrifty  wife  and  three  children.  Twenty  years  ago 
this  entire  country  was  a  bleak  wilderness  and  was  as 
unpromising  apparently  as  is  our  ill-starred  foun- 
dry. We  worked  hard,  sacrificed  every  unnecessary 
comfort  and  many  desirable  ones  so  that  we  could 
accumulate  something  for  old  age,  but  it  has  all 
gone  up  in  that  venture! 

As  I  said  before,  I  have  three  children.  Some 
one  may  say,  "Why  did  you  have  children?  They 
are  a  burden  and  expense?  "  Certainly  they  are  an 
expense  but  I  deny  that  they  are  an  unrequited 
burden  because  the  comfort  one  takes  with  them, 
the  love  with  which  they  repay  all  our  sacrifices 
infinitely  recompenses  every  other  consideration! 
Children  are  a  necessity  and  self-sacrifice  for  them 
is  a  necessity ;  every  member  of  my  family  counts 
it  a  joy  to  deprive  himself  or  herself  of  whatever 
will  contribute  to  the  happiness  and  well  being  of 
the  dear  children.  This  is  in  accordance  with  the 
laws  of  nature,  and,  God  bless  you,  nature  rewards 


20  TARIFF  AND    WAGES. 

US  for  every  sort  of  self-sacrifice  made  to  feed, 
clothe,  nurse,  educate  and  prepare  these  children  so 
that  when  they  become  independently-equipped  men 
and  women,  they  will  be  able  to  fight  their  way 
through  life  on  an  equality  with  other  men  and  women. 
They  enter  society  and  are  governed  by  the  laws  as 
they  find  them — they  are  free  only  within  the  law. 
Until  they  are  of  age  and  able  to  look  out  for 
themselves  we  look  after  them,  always  having  in 
mind  that  the  aim  should  be  lo  prepare  the  child 
for  independence  when  the  age  of  responsibility  is 
reached. 

Now  then,  with  this  familiar  sort  of  illustration 
I  beg  leave  to  present  this  plan  of  Community  Self- 
Sacrifice  by  which  I  believe  our  manufacturing 
industries  can  be  sustained  during  the  developing 
period  until  they  are  able  to  bid  defiance  to  all 
outside  competitors.  After  that  point  they  have 
no  right  to  exact  a  tax  from  the  community  for  their 
own  benefit ;  if  such  tax  is  then  imposed  it  is  legalized 
robbery.  I  think  that  it  is  not  only  perfectly  justi- 
fiable but  also  absolutely  necessary  that  we  should 
meet  the  advantages  possessed  by  our  older  and  better 
equipped  foreign  conunercial  rivals  by  some  sort  of 
protective  tariff,  and  my  plan  is  this : 

It  costs  us,  say,  ten  dollars  to  make  a  plow.  We 
want  25  per  cent,  for  profit  and  contingencies,  and 
we  sell  the  plow  for  $12.50.  But  England  is  able 
because   she  has  the  skill    and    means  to  make  a 


TARIFF  AND    WAGES.  2i 

plow  better  than  ours,  transport  it  hither,  and  put 
it  on  our  market  for  $io.  Is  it  any  wonder  that  we 
cannot  maintain  our  plow  works?     [No,  no]. 

Now  I  hold  that  this  plow  works  sustains  the 
same  relation  to  this  community  that  the  dependent 
child  does  to  its  parent,  and  under  all  the  circum- 
stances we  cannot  be  prepared  to  compete  with 
the  older  and  better  foreign  plow  works  unless  we 
as  a  people  take  our  own  works  to  our  hearts  and 
sacrifice  something  on  its  behalf,  a  sacrifice,  how- 
ever, that  is  more  apparent  than  real,  for  self-sacri- 
fice is  a  duty  %ve  owe  the  family  and  the  community, 
and  the  reward  is  as  a  rule  greater  than  the  sacrifice. 

My  plan  therefore  is  this :  Compel  the  foreigner 
to  pay  such  a  sum  for  the  privilege  of  bringing  his 
plow  to  our  market  as  will  make  it  possible  for  us 
to  establish  and  maintain  our  plow  works  at  a 
reasonable  profit.  In  other  words  a  tariff  gives 
us  advantages  that  otherwise  our  foreign  rival  would 
possess  to  our  detriment.  [Applause].  I  therefore 
recommend  that  a  tariff  of  thirty  per  cent,  be  laid 
on  the  foreign  plows.  This  will  give  us  an  advant- 
age of  five  per  cent,  and  in  a  few  years  we  shall 
have  prosperous  plow  works  and,  continuing  the 
policy  to  other  industries,  in  the  diversity  of  em- 
ployments thus  secured  we  will  find  openings  for 
capital  and  all  sorts  of  work  for  all  sorts  of  skilled 
workmen. 

Understand   me,  /  would  not  have  this  tariff  a 


22  TARIFF  AND    WAGES. 

perpetual  one.  As  our  capital,  skill,  resources 
and  experience  increase,  and  we  can  produce 
plows  cheaper  and  better,  I  would  have  the 
tariff  correspondingly  and  gradually  decreased,  and 
when  we  could  safely  do  so  I  would  remove  it 
entirely  and  say  to  the  plow  manufacturers,  as  I  say 
to  the  fully-equipped  man  or  woman — ^'- Paddle 
your  oivn  canoe. "  This  is  what  I  call  the  true 
theory  of  a  protective  tariff.    [Prolonged  applause]. 

Thomas  Doubtful  addresses  the  people,  say- 
ing; 

"down  on   the    tariff  robbery." 

Fello7V  Citizens:  I  am  a  farmer.  Eight  hundred 
of  the  i,ooo  men  in  this  settlement  are  farmers. 
We  have  wrested  wealth  from  the  soil  by  hard 
labor  and  for  one  I  am  opposed  to  this  tariff.  I 
can  now  buy  plows  from  abroad  for  %io  each.  Sup- 
pose that  every  one  of  us  800  farmers  wanted  a  new 
plow.  Under  this  tariff  we  would  have  to  pay  at 
least  $12.50  each  for  them,  or  $200  more  than  they 
would  cost  without  a  tariff,  and  I  am  totally 
opposed  to  it — //  is  robbery  of  the  soil-tillers  for  the 
benefit  of  the  manufacturers.  I  prefer  never  to  have 
manufactures  in  this  town  rather  than  to  be  com- 
pelled to  contribute  $2.50  for  the  privilege  of  hav- 
ing plows  made  here.  How  much  richer  is  the  town 
under  such  a  plan?  Suppose  that  we  cannot  make 
more  than   enough   plows  to  supply  our  own  town. 


TARIFF  AND    WAGES.  23 

Suppose  too  if  we  could  that  all  other  markets  were 
closed  to  us  by  local  tariff,  thus  cutting  off  our  sur- 
plus market,  each  plow  buyer  has  given  $2.50  for 
the  maintenance  of  a  plow  factory  and  nothing 
has  been  added  to  the  total  wealth  of  the  com- 
munity. Away  with  this  tariff  delusion,  I  say!  It 
is  "robbing  Peter  to  pay  Paul."     [Applause.] 

James  Insight  rises  and  says:  Mr.  Chairman: 
I  like  Mr.  Gooddeed's  plan.  Now  then  suppose 
that  there  were  $100,000  in  this  town,  and  of  the 
thousand  people  ten  persons  were  worth,  all  told, 
$90,000.  Let  me  ask  the  last  speaker  if  he  would 
not  consider  that  scheme  beneficial  to  all  the  peo- 
ple which  would  help  to  a  more  eveii  distribution 
of  this  money?  Now,  I  hold  that  wealth  in  the 
hands  of  the  few  is  not  the  benefit  to  a  community 
that  wealth  is  in  the  hands  of  the  many,  and  /  l)e- 
licve  that  manufactures  ivould  facilitate  the  distribu- 
tioti  of  our  wealth  by  keeping  it  more  constantly  in  cir- 
culatio7i.  Certain  persons  have  what  is  called  capi- 
tal. We  are  raising  now  all  the  grain  and  vegeta- 
bles we  need,  and  more  capital  invested  in  farm 
work  will  overstock  the  market  and  the  agriculturist 
will  soon  be  unable  to  effect  exchanges  at  a  profit. 
Every  farmer  has  all  the  help  he  needs  now.  What, 
then,  is  to  become  of  the  fifty  mechanics  amongst 
us?  Shall  they  become  town  poor  to  be  sustained 
from  the  poor  tax?     It  will  cost  at  least  two  dollars 


24  TARIFF  AND   WAGES. 

a  week  to  support  them  in  idleness.  If  they  can 
earn  no  money  for  bread  they  may  become  desper- 
ate with  hunger,  and  from  want  plunge  into  crime. 
If  our  plow  works  can  give  them  employment  and 
we  do  have  to  contribute  $2.50  for  every  plow 
made  it  would  be  cheaper  in  the  end  than  to  care 
for  them  out  of  the  poor  fund,  for  that  would  cost 
$5,250.  Whereas,  if  every  one  of  the  800  farmers 
here  bought  a  new  plow  this  year,  at  $12.50,  they 
would  be  contributing  a  total  of  $2,000  to  the 
sustaining  of  an  independent  manufactory  in  the 
town.  The  wooden  material  for  the  800  plows 
would  cost,  say  $1,000;  the  iron  work,  $2,500; 
the  wages,  $6,500;  total,  $10,000.  By  this  divi- 
sion the  fifty  mechanics  get  $2.50  each  a  week. 
Without  this  tariff  they  get  nothing  whatever,  our 
local  exchanges  are  limited,  and  we  have  to  put 
our  hands  in  our  pockets  and  pay  out  at  least  $2  a 
week  for  their  support.  For  one  I  am  in  favoi-  of 
the  tariff  and  shall  vote  for  it  because  it  promises  to 
keep  the  sixpence  nimble,  to  furnish  employment  for 
the  mechanic,  investment  for  the  capitalist,  and  an 
equitable  distribution  of  wealth,  without,  so  far  as 
I  can  see,  doing  any  one  any  unrequited  harm. 

Robert  Freetrade  —  Mr.  Chairman:  I  insist 
that  you  are  robbing  the  soil  tiller  for  the  benefit  of 
the  manufacturer  without  any  adequate  return 
and  I  protest  against  it.      If  I  give  $2.50  more  for 


TARIFF  AND   WAGES.  25 

an  American  plow  than  for  a  foreign  one,  where 
am  I  to  look  for  my  $2.50  from  the  manufacturer? 
It  is  stated  by  my  friend  here  that  I  get  it  back. 
How?  When?  Where?  Does  the  mechanic  pay 
me  any  more  for  my  grain  and  truck?  Not  a  cent. 
If  he  works  and  earns  $2.50  he  pays  $2  for  what 
he  eats.  If  the  town  takes  care  of  him,  it  costs, 
it  is  said,  $2  to  care  for  him,  or  about  the  same 
thing,  so  in  either  case  there  is  the  same  demand 
for  what  I  raise,  and  I  am,  under  this  tariff,  out 
my  $2.50. 

Mr.  Chairman.,  said  Mr.  Cogitans,  my  friend  is 
in  error  in  expecting  returns  in  kind.  We  are  taxed 
for  gas,  walks,  roads,  schools,  fire  and  police  protec- 
tion, and  our  taxes  are  money.  We  do  not  get  money 
back,  but  we  do  get  (what  we  esteem  as  better  than 
the  money;  we  vote  for  it  or  we  would  not  consent 
to  be  taxed)  light,  good  walks,  good  roads,  schools, 
protection  from  fire  and  criminals.  Because  we  do 
not  get  directly,  like  for  like,  it  does  not  follow 
that  we  do  not  get  full  satisfaction  for  all  our  self- 
sacrifice  for  the  public  good.  As  I  look  upon  this 
tariff,  it  is  in  general  like  our  taxes,  a  part  of 
wealth  or  income  which  each  one  pays  to  the  state  or 
society  for  that  which  otherwise  he  could  not  have. 

As  for  robbing  the  agriculturist  for  the  benefit  of 
the  manufacturer,  I  may  say  that  on  precisely  the 
same  grounds  we  may  affirm  that  every  industry  in 
the  world  has  been  built  up  out  of  money  wrested  from 


26  TARIFF  AND   WAGES. 

land  and  labor ^  for  land  and  labor  are  the  original 
factors  of  all  wealth,  and  if  the  plow  works  tariff  is 
a  robbery,  men  have  been  robbers  almost  from  crea- 
tion's dawn.  If  I  may  quote  precedent,  all  human 
history  justifies  the  position  we  take,  that  every 
advance  in  human  progress  has  been  made  on  the 
selfish  plan  so  far  as  the  rest  of  the  world  is  con- 
cerned^ and  on  the  self-sacrificing  plan  so  far  as  each 
community  is  concerned. 

Paul:  Well,  sir,  what  was  the  result  of  the 
discussion? 

Father:  A  canvass  was  had  on  the  30  per 
cent,  tariff  proposition  and  it  was  carried -by  a  vote 
of  700  to  300,  every  male  inhabitant  in  the  com- 
munity being  visited,  and  his  position  recorded. 
Within  three  months  the  blast  furnace  fire  was  relit 
and  the  manufacture  of  plows  was  begun.  The 
foreign  manufacturers  made  desperate  efforts  to 
compete  successfully  and  for  some  time  offered 
their  plows  at  less  than  cost  to  crush  out  our  works, 
but  they  finally  gave  up  the  contest.  During  the 
first  year  the  furnace  and  plow  works  gave  lucrative 
employment  to  all  our  skillful  mechanics  in  iron 
and  wood,  and  a  fair  profit  accrued  to  the  capital 
invested.  After  a  few  years  the  company  found 
itself  able  to  jjroduce  plows  successfully  against 
competition  with  a  20  per  cent,  duty  and  the  tariff 
was  knocked  off  10  per  cent.  Eventually  iron  and 
coal  were  found  in  the  neighborhood   and  this  fact 


TARIFF  AXD    WAGES.  27 

coupled  with  the  other  one  that,  as  the  community 
grew  in  age  the  facilities  for  providing  the  necessi- 
ties of  life  increased,  the  necessities  therefore  being 
reduced  *  in  price,  the  labor  of  skill  mechanics  was 
cheaper,  and  the  cost  of  production  was  so  much 
reduced  and  the  experience  and  skill  were  so  much 
advanced  that  finally  the  duty  was  entirely  removed 
from  foreign plo7i<s.  Then  the  plow  works  was  able, 
single  handed  and  alone  to  meet  competition  from 
any  source.  Longer  to  have  maintained  a  duty  against 
foreign  ploivs  would  have  been  an  unjustifiable  exac- 
tion. A  duty  which  is  justifiable  up  to  the  protective 
point  fosters  a  tyrannous  monopoly  zvhen  maintained 
beyond  that  point. 

Paul  :  Do  you  follow  the  opinions  of  Gooddeed 
and  Insight? 

Father:  Yes,  my  ideas  are  expressed  by  them 
in  general.     A  nation  is  like  a   family  —  made 

UP  OF  MANY  PERSONS  OF  DIFFERING  CAPACITIES, 
AND  FOR  THE  GREATEST  ULTIMATE  GOOD  EACH 
MEMBER  OF  THAT  FAMILY  IS  EXPECTED  TO  SACRI- 
FICE A  LITTLE  PERSONAL  COMFORT  AND  INCOME 
THAT  ALL  MAY  BE  SO  DEVELOPED  THAT  EVENTU- 
ALLY EACH  ONE  WILL  BE  AN  INDEPENDENT  FACTOR 
FOR     PROSPERITY     BASED     ON     SELF-RELIANCE.         In 


*  Note. — The  basis  of  wages  is  what  labor  can  earn  on  land,  and  as 
there  is  a  constant  falling  off  in  what  labor  on  land  might  produce 
there  is  a  gradual  lessening  of  the  nominal,  though  not  necessarily  of 
the  purchasing  power  of,  wages. 


28  TARIFF  AND    WAGES. 

the  constitution  of  society  selfishness  must  prevail 
with  each  family  as  a  family,  and  self-sacrifice 
prevail  among  the  individuals  of  that  family  as  indi- 
viduals. 

The    comparison    holds  good    with    states    and 
nations. 


CHAPTER    II. 

THE    LIMITATIONS    OF    THE    THEORY    OF    PRO- 
TECTION. 

When  a  Tariff  is  Unjustifiaisle — Regular  Revision 
Essential — Capital  will  not  Give  up  Protection 
Voluntarily  —  Immediate  Free  Trade  Would  Par- 
alyze all  Dependent  Manufactures  —  Free  Country 
AND  Free  Trade  not  Cognate  Freedoms —  Protec- 
tion Facilitates  the  Distribution  of  Advantages 
and  Wealth. 


Paul:  Why  is  it  father,  that  tariff  duties  are  so 
many  times  maintained  when  there  is  no  longer  any 
reasonable  doubt  that  the  protected  industry  is  able 
to  "go  it  alone?  " 

Father  :  Simply  because  protected  interests  are 
often  purely  selfish  and  without  regard  for  the 
people's  interests  they  will  employ  lobbyists  and 
"  persuade  "  legislators— many  of  whom  are  unable 
or  "unwilling"'  to  see  the  real  condition  of  things 
— to  maintain  a  tariff  because  it  gives  them  a  large 
profit.  A  monopoly  fostered  by  invidious  legisla- 
tion is  an  unjustifiable  and  cruel  extortion  and 
should  not  be  tolerated.  The  people  should  insist 
upon  a  regular  revision  of  the  tariff  by  competent 
persons.,  so  that  no  member  of  the  community  may 
build  a  fortune  upon  the  ruins  of  other  members  of 


30  TARIFF  AND   WAGES. 

the  community.  That  is  a  wanton  violation  of 
mutual  self-sacrifice^  and  becomes  ^^le^^alized  robbery.  " 

Paul:  Don't  you  think  tariff  tinkering  by  Con- 
gress is  an  injury  to  business? 

Father  :  Undoubtedly  it  is  an  apparent  injury, 
and  an  actual  one  when  the  revision  is  unwisely 
made  or  made  for  political  reasons,  but  the  very 
fact  that  industries  are  constantly  being  graduated 
to  positions  of  independence  must  be  considered, 
and  when  this  point  is  reached  the  tariff  must  be 
cut  off.  To  allow  it  longer  to  be  maintained  would 
be  legalizing  what  has  become  a  robbery.  Capital 
cannot  be  expected  voluntarily  to  stirretider  the  vant- 
age given  by  a  tariff.  The  te?idejicy  ahvays  under 
a  tariff  is  to  create  or  maintain  an  excessive  '^'^ pro- 
tection." 

EFFECT  OF  IMMEDIATE  FREE  TRADE. 

Paul:  What,  in  your  opinion,  would  be  the 
effect  of  an  immediate  recourse  to  free  trade? 

Father:  The  immediate  ruin  of  all  our  manu- 
facturing industries  that  had  not  been  developed  to 
the  point  of  independence ! 

Paul:     What  effect  would  that  have? 

Father:  It  would  throw  thousands  of  men  out 
of  employment  at  once ;  this  would  overstock  the 
labor  market  and  as  a  consequence  there  would  be  a 
depreciation  of  wages  everywhere;  the  products 
made  by  the  cut  off  concerns  would  of  course  come 


TARIFF  AND    WAGES.  31 

into  the  country  from  abroad  at  a  reduced  price, 
but  this  reduction  would  not  compensate  for  the 
general  paralyses  that  in  all  probability  would  ensue 
for  the  next  five  years  or  until  the  people  adjusted 
themselves  to  the  new  conditions.  Free  trade  as 
I  have  said  must  be  an  end  reached  by  gradual 
development.  To  ordain  it  at  once  would  disrupt 
the  commercial  relations  so  seriously  as  to  defeat 
utterly  desired  results  that  might  be  realized  by 
gradual  progress,  as  we  are  fitted  therefor,  toward 
free  or  independent  trade. 

FREEDOM    AND    FREE    TRADE    NOT    SEQUENCES. 

Paul:  One  of  the  leading  free  trade  advocates 
says  that  "we  are  a  free  country  and  should 
have  free  trade  "  ! 

Father:  Yes  and  it  would  be  just  as  sensible 
to  say  that  because  we  have  free  speech  we  should 
have  free  rum !  The  two  sorts  of  freedom  are  not 
sequences — one  can  prevail  without  the  necessity  of 
the  other.  In  all  commercial  regulations  we  must, 
in  prudence,  avoid  sudden  changes;  if  we  grow  up 
to  free  trade  the  growth  will  of  necessity  be  gradual 
and  then  as  we  steadily  develop  from  the  depend- 
ence which  the  tariff  is  ordained  to  overcome,  to 
the  independence  which  the  tariff  has  made  possi- 
ble, no  serious  violence  will  be  done  to  our  com- 
mercial interests.  If  we  had  more  "  hard-headed  " 
business    men    in    Congress,   instead  of    so   many 


32  TARIFF  AND   WAGES. 

theorizing  lawyers  and  scheming  pohticians,  I 
fancy  that  tariff  revision  would  not  be  as  disturb- 
ing to  business  interests  as  it  now  seems  to  be  and 
often  is. 

PROTECTION    DOES    NOT    ENRICH    THE    FEW    ALONE, 
IT    DISTRIBUTES    ADVANTAGES. 

Paul:  Don't  you  think  that  protection  enriches 
the  many  at  the  expense  of  the  few  ? 

Father:  Yes,  if  the  tariff  be  unjustifiably 
high,  but  if  it  be  simply  a  protective  tariff  then 
the  people  reap  as  many  benefits  as  do  the  "few." 
The  trouble  is  my  son  that  people  look  at  results 
with  very  little  philosophy.  If  our  manufacturers 
gain  wealth  in  business  the  man  who  judges  only 
by  what  he  can  see,  exclaims :  ' '  look  at  the  bloated 
bond-holder,  the  monopolist,  the  one  enriched  at 
the  expense  of  the  many,"  etc.,  etc.  He  sees  the 
successful  man's  wealth,  but  of  the  vaster  amount 
which  he  has  distributed  among  the  people  in  both 
comforts  of  life  and  superior  advantages  in  every 
respect  he  takes  no  account,  and  yet  to  this  one 
man's  work  the  entire  country  is  indebted.  Take 
the  Bell  telephone  for  instance.  Prof.  Bell  was 
protected  by  a  patent.  Under  it  he  has  gained 
many  hundreds  of  thousands  of  dollars.  The  patent 
was  worth  nothing  to  him  until  it  was  zvorth  many 
millions  more  to  the  people  in  manifold  ways  than 
he  ever  made  out  of  it.     In  estimating  results  we 


TARIFF  AND    WAGES.  33 

must  take  account  of  the  seen  and  unseen  bene- 
fits. The  Vanderbilt  system  of  railroads  has 
made  tens  of  millions  for  itself  but  it  has  also,  I  dare 
say,  distributed  scores  of  millions  of  dollars'  worth 
of  advantages  to  people  all  over  the  United  States. 
Our  country  has  been  under  a  protective  tariff 
quite  continuously  since  1789,  and  we  had  accumu- 
lated up  to  1880  over  $45,600,000, 000  of  net  wealth, 
that  being  an  average  of  over  $800  per  capita  of 
population.  In  Great  Britain,  which  has  been  a  free 
trade  country  since  1846,  there  was  in  1880  a  net 
accumulation  of  $39,755,000,  ora  little  over  $1,000 
a  head.  We  have  accumulated  our  wealth  in  at 
least  one-quarter  the  time  in  which  Great  Britain 
has  won  hers.  This  shows  that  the  wealth  of  the 
country  under  protection  has  not  all  gone  into  the 
hands  of  the  few  in  this  country,  nor  under  free 
trade  to  the  many  in  England.  Besides  the  wealth- 
showing,  instead  of  our  people  being  mostly  of  the 
agricultural  class  as  England  would  have  forced  us 
to  be  had  her  policy  prevailed,  over  66  per  cent, 
are  engaged  in  other  industries  which  a  protective 
tariff  so  essentially  helps  to  develop. 


CHAPTER   III. 

WHEN    MONEY    SAVED    IN    FOREIGN    CONTRACTS 
IS  A  LOSS. 

Equivalence  of  Exchanges  Necessary  —  Buying  in  the 
Cheapest  and  Selling  in  the  Dearest  Market  Sub- 
ject TO  Limitations  —  Free  Trade  Between  the 
States  not  a  Conclusive  Argument  against  Pro- 
tection—  Free  Trade  a  good  Universal,  but  not 
necessarily  a  good  Particular  Theory. 


Paul:  Suppose  that  a  construction  company 
advertised  for  bids  on  steel  rails  for  five  miles  of 
railroad  in  this  country,  that  an  English  company 
offered  to  do  it  for  $5,000,  and  an  American  com- 
pany for  $5,250.  Would  it  not  be  better  to  let  the 
contract  to  the  foreigner ;  better,  I  mean,  for  the 
people  as  well  as  the  construction  company? 

Father:  Not  for  the  people  unless  the  fo7'eign 
company^  which  tvoiild  take  Ss,  000  out  of  the  coun- 
try, expended  it  in  the  country — which  it  could  not 
do  unless  it  got  all  its  material  and  labor  in  the 
country — or  in  the  products  of  the  country,  for  other- 
wise there  would  be  no  adequate  exchange.  If  all 
nations  were  on  a  free  trade  basis  and  each  one 
had  special  facilities  for  turning  out  products  neces- 
sary for  the  others,  then  it  would  make  no  material 
difference    where    the    contract     was    placed,    for 


TARIFF  AND    WAGES.  35 

exchanges  of  products  would  be  more  or  less  con- 
tinuous and  equivalent  and  all  would  be  able  to 
share  in  the  profits  thereof.  That  is  to  say,  if 
England  could  excel  in  iron  works,  America  in 
cotton  goods,  India  in  corn  and  wheat,  Russia  in 
timber  and  gold,  France  in  silks  and  wine,  Germany 
in  linens  and  hemp,  Australia  in  wools.  South 
America  and  Mexico  in  silver  and  diamonds — all 
more  or  less  necessities  to  all — then  under  universal 
free  trade  the  field  of  mutual  interests  would  be 
larger,  each  nation  would  be  more  dependent  upon 
the  others  and  international  considerations  would 
prevail ;  but,  inasmuch  as  free  trade  does  not  rule 
universally  and  as  every  nation  recognizes  the 
necessity  of  developing — if  possible — a  variety  of 
interests  so  as  to  give  employment  to  the  variety 
of  capabilities  which  prevails,  a  contract  cannot  be 
sent  out  of  one  country  to  another  without  marked 
detriment,  unless,  as  I  have  said,  it  brings  about  an 
equivalent  exchange  of  commodities. 

Yes,  it  is  true  that  the  American  construction 
company  gets  the  road  $250  cheaper  by  giving  the 
contract  to  English  bidders,  and  that  it  gets  the 
steel  rails  in  return  for  its  money  ($5,000),  but  I 
claim  that  without  an  exchange  of  products  between 
the  countries  the  loss  to  the  community  and  to 
the  company  is  in  the  end  greater  than  the  amount 
($250)  saved. 

Paul:     How  so? 


36  TARIFF  AND   WAGES. 


ALL    INTERESTS     MUST     BE    CONSERVED. 

Father:  Carry  the  illustration  to  the  extreme. 
The  older  and  better  equipped  country,  if  we  had 
ten  thousand  5 -mile  contracts  to  let,  could  as  a 
rule  get  the  contract.  What  would  be  the  result? 
We  would  send  abroad  10,000  times  $5,000,  or 
$50,000,000,  which  would  keep  thousands  0/  foreign 
work/ncn  oiiploycd  at  the  expense  of  an  equal  tiumber 
or  an  equal  productive  force  of  American  workmen 
and  mechanics^  unless,  as  stated,  the  foreigners  by 
buying  of  us  gave  us  a  chance  to  recoup  ourselves. 
The  result  would  be  the  ruin  of  every  steel  mill 
and  railroad  mechanic  in  the  land,  and  unless  the 
capital  sent  abroad  came  back  to  us  in  equal 
measure  for  our  other  products  we  would  be  com- 
mercially paralyzed.  The  idea  that  we  should  ahvays 
buy  in  the  cheapest  market  and  sell  in  the  dearest  is 
subject  to  very  important  qualifications,  and  does  ?iot 
apply  unless  the  buying  and  selling  markets  have  well 
balanced  reciprocal  relations  with  each  other.  Every 
dollar  sent  abroad,  unless  it  directly  or  remotely 
sends  back  an  equivalent,  is  lost  to  us.  For  our 
$50,000,000  we  have  50,000  miles  of  railroad,  but 
of  what  worth  are  the  railroads  if  the  money  of 
the  country  is  all  gone  and  no  .exchanges  take 
place  to  enable  us  to  recoup  ourselves?  We  must 
look  beyond  the  few  dollars  saved  on   the  contract  to 


TARIFF  AND    WAGES.  37 

see   if  ill  saving  thcin    we   arc    not  jeopardizing  the 
greater  interests  of  the  community  at  large. 

FREE      TRADE      BETWEEN     THE     STATES     NO      ARGU- 
MENT   AGAINST    NATIONAL    PROTECTION. 

Paul:  But  Sumner  and  other  free  trade  writers 
state  that  the  very  conditions  of  trade  obtaining 
between  the  states  is  an  argument  for  free  trade 
and  against  protective  tariffs.  Sumner  says,  page 
9,  in  "Protection  in  the  United  States";  "If  it 
"be  said  that  small  states  [new  countries]  cannot 
"afford  to  trade  freely  with  great  empires  [old 
"countries]  here  are  New  York  and  Connecticut, 
"Pennsylvania  and  Delaware.  Why  do  not  the 
"great  states  suck  the  life  out  of  the  small  ones?  " 
Again :  New  states,  like  Oregon  and  Idaho,  with 
no  capital  and  in  the  first  stages  of  culture, 
exchange  freely  with  New  York  and  Massachusetts. 
Again,  to  show  that. states  relying  on  one  industry 
can  afford  to  exchange  freely  with  those  having 
a  diversity  of  interests,  he  instances  Pennsylvania 
and  Colorado,  California  and  Nevada,  any  of  the 
cotton  states,  and  any  of  the  northeastern  states. 
What  have  you  to  offer  to  the  contrary? 

Father:  My  son,  I  want  to  emphasize  the  fact 
that  if  all  the-  business  in  the  ivorld  were  conducted 
on  the  free  trade  basis  then  every  country  would  hold 
the  same  relations.,  commercially.,  that  the  states  do  to 


38  TARIFF  AND    WAGES. 

each  other,  and  each  one  would  thrive  on  a  free 
exchange  of  its  special  product  with  the  special 
products  of  the  others.  //  7vould  be  death  to  any 
state  in  this  Union  to  take  a  commercial  course  dif- 
ferent from  that  pursued  by  all  the  others,  unless  it 
were  the  oldest,  richest,  best  equipped  in  men,  means 
and  resources. 

For  instance :  Suppose  that  New  England  were  as 
well  equipped  to  supply  the  wants  of  the  rest  of 
the  country  to-day  as  England  is  to  supply  the  rest 
of  the  world.  Suppose,  also,  that  all  the  states  out- 
side New  England  were  under  a  protective  tariff — 
standard  or  variable  —  would  it  not  be  the  suprem- 
est  folly  for  any  other  section  outside  New  England 
to  throw  open  its  markets  to  free  trade,  unless  it 
was  on  a  substantial  economic  equality  with  New 
England?  If  all  the  world  did  business  on  the  free 
trade  basis,  then  protection  would  probably  be  unneces- 
sary for  any  one  nation,  but  when  the  leading  com- 
mercial powers  have  protective  tariffs,  then  I  insist 
that  in  the  face  of  such  a  superior  as  Eyigland,  as 
long  as  she  is  our  superior,  it  would  be  commercial 
suicide  for  us  to  put  in  practice  unrestricted  free 
trade.  This,  I  take  it,  is  a  sufficient  answer  to 
Prof.  Sumner's  objections. 

sumner's  objections    irrelevant. 

Sumner's  illustrations,  however,  do  not  apply  to 
the  case  as  I  view  it.      Moreover,  if  they  did,  the 


TARIFF  AND   WAGES.  39 

present  condition  of  free  trade  between  the  states 
is  enforced  by  constitutional  provisions.  It  is  a 
sequence  of  the  "  nationahty  "  idea.  If  one  state 
could  erect  trade  barriers  against  another  the  har- 
mony would  be  disturbed  and  the  Union  imperiled. 
This  provision  therefore  was  deemed  e.xpedient,  in 
order  "  to  form  a  more  perfect  union." 

Again,  it  does  not  follow  that  commercially  the 
states  have  gained  more  by  the  free  trade  than  they 
would  have  gained  had  state  tariffs  been  allowed. 
Mr.  Sumner  assumes  that  they  have,  but  I  cannot 
admit  assumption  as  argument. 


CHAPTER    IV. 

THE  EVILS  OF    OVER-PROTECTION. 

Too  Much  Protection  a  Great  Wrong  —  The  Raw 
Material  Problem — Admit  the  Unproducable  Raw 
Material  Free  —  Community  Self-sacrifice  demands 
Satisfaction  always  —  The  Rule  of  a  Tariff  on 
Raw  Materials. 


Paul:  Can  you  tell  me  why  it  is  that  in  the 
heavily  protected  industries  of  to-day  there  are  so 
many  periods  of  action  and  reaction,  prosperity 
and  adversity?  Is  not  this  fact  a  serious  objection 
to  protective  tariffs? 

Father:  It  is  a  decided  objection  to  an  exces- 
sive tariff.  The  moment  you  put  a  tariff  on  any 
foreign  article  greater  than  necessary  simply  to 
foster  our  own,  then  capital  makes  haste  to  engage 
in  the  manufacture  of  the  article  thus  favored, 
because  the  high  tariff  ensures  a  heavy  return  to 
those  who  are  quick  to  take  advantage  of  the  situa- 
tion. What  is  the  result?  Before  the  tariff,  say 
$100,000  was  invested  in  a  certain  branch  of  manu- 
facturing. After  the  high  tariff,  $500,000  is  put 
into  the  business  and  the  consequence  is  that  five 
times  as  much  of  the  article  is  produced,  and  very 
soon,  men   make  such  haste  to    "get   their  pile" 


TARIFF  AXD    WAGFS.  41 

that  the  bushiess  is  overdone,  the  demand  is 
exhausted  and  down  come  the  prices. 

Physicians  tell  us  that  certain  drugs  in  minute 
doses  will  accomplish  physical  good.  If  the  dose 
is  increased  it  will  do  infinite  harm.  "If  a  tariff 
is  a  good  thing  "  — say  some  unthinking  ones,  "  we 
can't  have  too  much  of  it."  I  do  not  concur.  It 
is  healthful  and  stimulating  when  limited  to  simple 
protection  against  ruinous  competition  —  it  is 
demoralizing  and  enervating  when  prescribed  in 
greater  doses  than  such  circumstances  require.  As 
a  rule  the  greater  the  tariff  on  any  one  article 
beyond  this  point,  the  greater  and  more  disastrous 
are  the  fluctuations  attending  its  manufacture,  pro- 
vided this  manufacture  is  the  privilege  of  any  who 
wish  to  engage  in  it. 

We  must  not  condemn  the  true  protective  theory 
because  outrageous  tariffs  have  been  enacted  in  its 
name.  I  fancy  that  if  many  free  traders  —  so- 
called —  and  protectionists  would  come  to  a  clear 
statement  of  their  views  there  would  be  a  very 
substantial  agreement  between  them.  The  trouble 
is  that  pot  insists  on  calling  the  kettle  black. 

Paul:  What  do  you  do  with  those  who  would 
limit  the  tariff  to  such  a  figure  as  would  simply 
supply  revenue  to  meet  the  running  expenses  of 
the  government? 

Father:  To  be  consistent  with  the  free  trade 
doctrine  they  cannot  accept  this  compromise — they 


42  TARIFF  AND   WAGES. 

must  meet  government  expenses  (as  they  are  met 
in  the  states)  by  internal  taxation.  (See  page  lo, 
Sumner's  Protection  in  the  United  States.)  I  can- 
not imagine  the  shape,  form,  size,  or  purpose  of  a 
free  trader  who  consents  to  a  tariff  "for  revenue 
only,"  when  that  revenue  can  be  collected  directly 
from  the  people  (as  it  is,  in  the  form  of  taxes),  in 
the  states.  In  this  particular  England  is  logical. 
She  opens  her  ports  to  all  the  world,  taxing  only 
spirits  and  tobacco,  but  she  exacts  a  thousand  and 
one  taxes  from  the  people  — there  is  the  stamp  of 
royalty  on  everything  of  value,  and  I  am  amazed 
that  this  eternal  payment  of  tribute  unto  an  ever- 
exacting  Caesar  does  not  disturb  the  equilibrium  of 
British  loyalty.  I  do  not  care  to  quote  statistics 
here,  but  you  can  readily  imagine  how  perfectly 
the  net- work  of  "  inland  revenue  "  encompasses 
the  empire  when  you  consider  how  enormous  are 
the  annual  expenses  of  the  British  government. 

THE    RAW    MATERIAL     PROBLEM. 

Paul:  Father,  do  you  favor  a  tariff  on  tea  and 
coffee? 

Father:  Can  they  be  produced  in  this  coun- 
try, or  are  any  attempts  made  to  produce  them  in 
this  country? 

Paul:     Not  that  I  am  aware  of. 

Father:  Then  I  would  not  put  a  tariff  upon 
them. 


TARIFF  A  AW    WAGES.  43 

Paul:  Would  you  put  a  tariff  on  what  is  called 
"raw  material  "? 

FOREIGN      WOOL. 

Father:  It  is  hard  to  define  "raw  material," 
for  what  is  the  raw  material  of  one  man  is  the 
finished  product  of  some  other  man.  That  is  to 
say,  the  fine  foreign  fleeces  which  the  American 
woolen  manufacturer  needs  to  make  a  cloth  equal 
to  the  foreign  fabric,  should  not  be  put  in  the 
tariff  schedule  unless  there  is  a  reasonable  prospect 
that  it  or  its  equivalent  can  thereby  be  produced  in 
our  own  country,  for  otherwise  we  handicap  the 
American  woolen  manufacturer  in  his  competition 
with  the  foreign  cloth  maker. 

DOMESTIC    WOOL. 

Paul:  But  how  would  this  please  the  domestic 
wool  growers?  Would  they  not  have  good  cause 
to  complain  that  they  were  not  sharing  the  mutual 
benefits  and  self-sacrifices  you  talk  about? 

Father:  They  would  have  no  just  cause  of 
complaint  because  they  would  have  no  right  to  ask 
for  a  tariff  on  an  article  which  cannot  be  produced 
in  the  United  States. 

Paul  :  But  if  a  duty  were  placed  on  the  foreign- 
grown  wool,  would  it  not  compel  our  home  woolen 
cloth  makers  to  purchase  the  domestic  wool? 

Father:  It  might,  but  the  ultimate  purpose 
sought  would  be  defeated,  for  7i.nth  an  inferior  wool 


44  TARIFF  AND    WAGES. 

we  could  not  make  a  ycally  co)npctitive  fabric^  and,  to 
keep  the  foreign  fine  wool  goods  out  of  the  market, 
we  would  have  to  lay  a  duty  on  them  which  ivould  be 
contrary  to  the  true  protective  theory;  for  it  would 
never,  by  any  possible  self-sacrifice,  secure  the  end 
desired  —  a  piece  of  domestic  cloth  as  good  as  the 
foreign  article.  In  other  words,  the  domestic  wool 
growers  would  be  asking  self-sacrifice  from  the 
rest  of  the  country  from  which  no  adequately  com- 
pensating return  would  be  got. 

Paul:  How,  then,  would  the  domestic  wool 
business  get  any  benefit  from  the  protective  tariff? 

Father:  We  would  put  a  duty  you  know  on 
all  forms  of  woolen  goods.  Only  the  finer  grades 
of  cloth  would  require  the  finer  "raw  material" 
wool  which  we  could  not  produce  and  by  admit- 
ting this  free  ive  7vould  enhance  the  prospect  of  ulti- 
mately producing  an  equally  good  article  of  cloth. 
The  manufacture  of  the  lower  grades  of  cloth, 
which  we  could  produce  equally  with  the  foreign 
low  grades  (the  wool  of  which  we  would  exclude 
by  tariff),  would  furnish  an  ample  demand  for  the 
domestic  fleece.  If  it  did  not  we  would  not  be 
justified  in  excluding  the  foreign  finer  grades  when 
the  coarser  domestic  grades  could  never  answer  the 
purpose.  A  tariff,  to  be  justifiable,  must  give  a 
reasonable  prospect  of  an  ultimate  satisfaction  of 
mutual  self-sacrifices. 


TARIFF  AND    JTAGES.  45 


FOREIGN    VS.     DOMESTIC    PIG-IRON. 

Paul:  On  the  same  principle,  then,  you  would 
put  pig-iron  on  the  free  Hst  if  there  was  no  appar- 
ent prospect  that  pig-iron,  good  enough  to  place 
our  iron  products  on  a  level  with  the  foreign  com- 
peting article,  could  be  produced  in  the  United 
States? 

Father:    Certainly. 

Paul:  Then,  accordingly,  we  must  accept  the 
alternative  of  free  foreign  pig-iron,  or  no  possi- 
bility of  successive  rivalry  of  home  made  with 
foreign  made  iron  products? 

Father  :  Exactly.  The  //ome  producers  of  pig- 
iron  have  no  right  to  ask  that  the  country  be  taxed 
for  their  benefit  if  no  compensating  return  is  even 
possible. 

We  may  state  the  general  rule  that  we  must  admit 
free  of  duty  those  products — "raw  materials  "  if 
you  please — which  our  manufactures  must  have  in 
order  that  they  may  successfully  compete  in  the 
home  market  with  the  foreign  article  excluded  by  a 
true  protective  tariff,  provided  that  that  raw  material 
or  what  is  equally  as  good  cannot  be  produced  in 
our  own  country,  or,  provided  that  we  cannot 
make  by  superior  skill  or  resources  in  manufacture 
even  with  a  lower  grade  of  "raw  material,"  an 
article  as  good  as  the  foreign  made  article. 


46  TARIFF  AND    WAGES. 


THE    RULE    OF     A    TARIFF. 


We  cannot  with  ati  inferior  " /vrri'  viateriaV  hope 
to  compete  with  a  vianiifactitrcr  hai'iiig  a  supe?'ior 
'''' raw  Jiiaterial,"  n?iless  perhaps  we  can  gain  com- 
pensating advantages  in  the  methods  and:  facilities  of 
manufacture. 

Paul:  Father,  if  we  can  make  any  article 
cheaper  and  better  than  any  foreign  manufacturer 
could,  would  you  place  a  duty  on  any  "raw 
material  "  entering  into  its  manufacture? 

Father:  Not  unless  by  so  doing  I  could 
develop  an  equally  good  or  a  better  raw  material 
here. 

Paul:  Suppose  then  the  duty  put  on  the  for- 
eign "  raw  material  "  should  so  increase  the  cost  of 
manufacture  that  competition  would  be  put  out  of 
question? 

Father:  I  should  proceed  very  cautiously,  and 
would  not  put  the  duty  on  if  I  was  sure  that  I  would 
destroy  well-established  manufactures — it  would  be 
very  unwise  to  exchange  a  certainty  for  an  uncer- 
tainty— a  thing  attained  for  one  possibly,  if  attained, 
of  no  greater  value.  We  are  not  justified  in  asking 
comnwnity  self -sacrifice  unless  we  can  render  a 
satisfactory  equivalent  therefor. 


CHA  P  TER     V. 

THE   PROBLEM  OF   OVER-PRODUCTION. 

Not  Necessarily  Involved  Exclusively  in  the  Tariff  — 

OVER-PROnUCTION  AS  MUCH  A  SEQUENCE  OF    FrEE   TrADE 

AS  OF  Protection — Human  Nature  and  the  Ques- 
tion — The  Tariff  North  and  the  Free  Trade  South 
IN  1860-65  —  We  shall  Eventually  be  Free  Traders 
in  Policy. 

Paul:  To-day  I  met  an  intelligent  farmer  who 
writes  much  for  the  agricultural  press,  and  he  said 
that  protection  had  injured  manufacturing  in  this 
country  and  quoted  over-production  as  evidence. 

Father:  Might  he  not  as  well  have  said  that 
over-production  was  as  much  the  result  of  the  fact 
that  our  business  men  are  too  sanguine,  rush  pell 
mell  into  the  mad  race  for  wealth ;  that  too  many 
"nincumpoops  "  are  trying  to  conduct  the  business 
of  the  land  —  men  who  put  no  real  judicious  think- 
ing and  planning  into  commercial  transactions? 
An  unjustifiably  high  tariff  no  doubt  does  injury 
—  it  is  an  overdose  of  a  good  thing — but  it  is  a 
shameful  calumny  to  attribute  all  our  commercial 
ills  to  protection  even  though  the  tariff  be  higher 
in  some  respects  than  can  be  justified. 

NOT    NECESSARILY    CAUSED    BY    PROTECTION. 

Does  not  the  same   state  of  things  arise  in  calm, 


48  TARIFF  AXD    IVAGES. 

sagacious,  cool,  calculating,  free  trade  England? 
It  is  not  the  system  that  is  so  much  at  fault  as  it  is 
that  the  "businessmen"  who  are  working  under 
it  are  so  ill  prepared  to  fashion  out  a  wise,  conser- 
vative business  policy.  As  long  as  people,  like 
fishermen,  rush  to  the  most  productive  parts  of  the 
ocean  of  commerce,  neglecting  all  the  rest,  we 
may  expect  an  overdraft  of  fishes  when  a  hundred 
nets  are  set  where  one  should  be.  Over-produc- 
tion follows  as  much  from  want  of  business  sagacity 
as  from  the  fact  of  protection,  and  I  think  a  deal 
more.  Money  in  the  hands  of  impetuous  men 
rushes  pell-mell  where  it  can  quickest  increase 
upon  itself.  As  a  result  it  soon  exhausts  this 
source  of  wealth  and  what  was  once  very  profit- 
able now  becomes  a  source  of  loss. 

DEVELOP     INDUSTRIAL    INDEPENDENCE. 

My  son,  the  American  people  believe  that  it  is  a 
good  and  desirable  thing  to  be  as  independent  as 
possible  of  all  the  world.  During  the  late  war  the 
South,  which  had  for  years  been  in  favor  of  free 
trade  and  did  nothing  to  develop  manufactures,  was 
utterly  exhausted.  When  all  the  foreign  ports 
were  closed  to  her  by  the  Northern  blockade,  the 
source  of  supply  of  war  munitions,  clothing  and  all 
manufactured  articles  was  cut  off  and  four  years 
of  war  impoverished  her.  Had  the  North  been  in 
like  manner   isolated    she  would  have  been  able  to 


TARIFF  AND    WAGES.  49 

endure  ten  times  as  long  because  she  had  developed 
diversity  of  interests  and  was  able  to  manufacture 
nearly  everything  she  needed.  The  free  trade 
section  was  unable  to  cope  with  the  protectionist 
section. 

WHAT    FREE    TRADERS    ADVISE. 

Free  traders  want  us  to  develop  our  natural 
resources  and  depend  on  the  world's  markets  for 
all  else  we  need.  Protectionists  insist  that  it  is 
wiser  to  become  a  complete  people,  able  to  supply 
all  our  own  needs  in  peace  and  war.  We  hold 
that  our  people  should  be  masters  of  the  details  of 
all  the  necessary  trades,  whereas  the  free  trader 
says:  "Put  the  sole  on  the  shoe,  if  nature  has 
best  fitted  you  for  this  work,  but  let  some  other 
nation  finish  it  and  put  it  on  the  market  if  it  is  best 
fitted  for  that  work." 

WHAT    PROTECTIONISTS    ADVISE. 

Protectionists,  however,  say:  "  Raise  the  cattle, 
tan  the  leather,  make  the  necessary  lasts  and 
machinery,  cut,  fit,  sew,  sole,  finish,  make  a  home 
market  and  sell  the  finished  shoe  yourself. "  I  con- 
fess that  I  like  the  protectionist  advice  for  Qur 
country,  and  am  more  than  willing  to  employ 
legitimate  protection  up  to  the  point  where  we  can 
accomplish  this  complete  development. 

WE    SHALL    BE    FREE    TRADERS    EVENTUALLY. 

A  nation  that  is  thus  capable,  will  some  day  com- 


50  TARIFF  AND   WAGES. 

mund  the  trade  of  the  world,  and  when  that  time 
comes,  every  self-sacrifice  made  to  develop  this 
independence  will  be  satisfied.  Some  day  when 
all  the  circumstances  permit  we  shall  be  a  nation 
of  free  traders  with  the  majority  of  our  industries. 
Every  decade  brings  us  nearer  to  the  industrial 
independence  that  makes  free  trade  possible  here 
in  all  respects,  and  when  we  do  properly  take  that 
position  we  shall  commercially  rule  the  world. 
Every  year  many  industries  under  our  fostering 
tariff  become  independent  of  the  tariff  and  are 
able  and  should  be  required  to  push  out  on  an 
independent  career. 

Paul:  Since  you  are  a  theoretical  free  trader 
how  would  you  hasten  that  free  trade  regime? 

Father:  I  would  try  to  have  an  international 
commission  appointed  for  the  purpose  of  advancing 
free  trade  conditions  throughout  the  world.  Then 
we  would  take  our  chances  with  the  rest,  as  each 
state  takes  its  chances  of  trade  with  all  its  fellows 
in  the  United  States. 

Paul:  Would  you  favor  free  trade  if  it  could 
be  made  universal? 

Father:  Yes,  provided  sufficient  notice  was 
given  so  that  all  the  world  could  prepare  itself 
gradually  for  the  new  conditions. 

Paul:  Don't  you  believe  if  the  United  States 
should  ordain  free  trade,  that  she  and  England 
would  compel  other  nations  to  adopt  it? 


TARIFF  AND   WAGES.        .  51 

Father:  No,  sir.  Free  trade  is  an  evolution, 
and  it  can  never  be  accomplished  by  a  spontaneous 
revolution.  It  will  prevail  in  each  nation  only  as 
personal  experience  shows  that  it  is  the  wisest  and 
best  policy  for  each  nation  to  pursue. 


CHAPTER     VI. 

WHAT  IS  MONEY  AND  WHAT   MONEY  IS  NOT. 

Gresham's  Law  Explained  —  The  Evils  of  Any  Form  of 
Depreciated  Currency  Sure  to  be  Realized  —  Honest 
Money  Policy  is  the  Best. 


Paul:  Speaking  of  wages,  father,  we  come 
first  to  the  question  of  money.  Will  you  please 
explain  Gresham's  law  that  "the  baser  money 
always  drives  out  the  better?  " 

Father:  "  Gresham's  law  "  is  quite  axiomatic. 
If  you  sell  an  Englishman  a  plow  for  $io  you  want 
exactly  ten  dollars  and  you  want  that  ten  dollars 
actually,  not  nominally.  If  England  has  gold  and 
silver  standards  of  money,  and  two  gold  sovereigns 
are  nearer  the  exact  measure  of  $io  than  forty 
silver  shillings,  you  will  expect  and  can  demand 
settlement  in  gold.  If  the  forty  English  silver 
shillings  are  nearer  the  $io,  you  will  demand  forty 
English  silver  shillings  in  pay.  Thus  in  order  to 
settle  his  debt  the  English)iian  iiii/st  send  here  his 
best  {jHOst  valuable^  money  and  tJius  the  cheaper 
money,  whether  it  be  gold,  silver  or  paper,  drives  out 
of  England  the  better  paper  money.  Hence  in  all 
international  trade  the  balances  which  have  to  be 
settled    in    money  must    be    provided    for   by    the 


TARIFF  AND    WAGES.  53 

medium  that  has  the  highest  vahie  in  the  inter- 
trading  countries.  In  a  few  years,  therefore,  a 
continuous  adverse  balance  will  take  all  the  most 
valuable  njoney  out  of  the  country,  leaving  the 
depreciated  money. 

"paper  money,"  good  and  bad. 

Paul:  How  about  what  is  called  "paper 
money?  " 

Father:  Paper  is  not  money,  it  is  only  a  rep- 
resentative of  money  and  can  have  no  commercial 
value  greater  than  what  it  represents,  A  piece  of 
paper  issued  by  a  government  is  a  commercial  con- 
venience. If  it  is  convertible  at  the  will  of  the 
holder  into  the  valuable  thing  —  the  product  of 
labor  —  that  it  represents,  it  is  a  much  more  welcome 
circulating  medium  than  coin  for  reasons  which 
are  apparent.  If  a  bit  of  paper  is  called  a  "dol- 
lar," unless  it  has  taken  a  dollar's  worth  of  labor 
to  produce  that  bit  of  engraving,  pulp  and  color, 
or  unless  it  can  readily  facilitate  an  exchange  of  a 
real  dollar's  worth  of  labor,  it  is  a  travesty  of 
money — it  is  a  fraud. 

If  such  "money"  were  made  a  legal  tender  for 
all  public  and  private  debts  in  the  United  States, 
Gresham's  law  would  again  tell  us  that  either  the 
gold  and  silver  would  be  driven  out  of  the  country 
in  settling  foreign  balances  if  there  were  any,  or, 
if  not,  the  gold   and  silver  would   be  driven  out  of 


54  TARIFF  AND   WAGES. 

circulation  at  home  because  of  the  singular  habit 
that  people  have  of  hoarding  them  when  "paper 
money"  gluts  the  land.  Moreover^  as  the  value  of 
money  depreciates,  prices  correspondingly  increase,  for 
hou'etier  men  fnay  legislate,  financial  justice  demands 
afid  will  enforce  a  satisfaction  of  values. 

FINANCIAL    DEBAUCHERY, 

As  I  have  said,  money  —  the  measure  of  com- 
mercial values  and  the  medium  of  exchange  —  is 
tzken  for  7cihat  it  is  or  represents  —  not  for  what  it 
pretends  to  be.  And  paper  must  represent  some- 
thing that  has  the  commercial  value  indicated  by 
it,  otherwise  it  must  in  some  way  be  discounted  in 
exchange.  Whatever  prevents  the  immediate  real- 
ization of  what  paper  money  represents,  decreases 
its  value  in  exchange.  If  the  government  issues  a 
$5  note  payable  in  five  years,  in  every  exchange 
accomplished  by  that  note  the  length  of  time 
which  the  holder  of  the  note  has  to  wait  for  its 
redemption  is  taken  account  of,  and, — the  proba- 
bility of  its  prompt  redemption  being  conceded,  — 
the  purchasing  power  of  the  $5  note  is  correspond- 
ingly affected.  Business  is  an  exchange  of  actual, 
not  of  nominal,  values,  and  no  legislative  body  can 
successfully  compel  men  to  exchange  what  they 
know  is  commercially  valuable  for  what  they  know 
is  commercially  not  valuable.  A  few  years'  riot  of 
"  paper  money, "  based  on  the    promise  to  pay  in 


TARIFF  AND    WAGES.  55 

the  remote  future  may  seem  to  short-sighted 
people  to  be  an  era  of  commercial  activity  and 
prosperity  but  when  the  inevitable  settling  day 
comes  in  the  utter  and  universal  prostration  we 
read  the  evidence  of  a  terrible  financial  and  com- 
mercial debauch. 


CHAPTER     VII. 

THE  MODERN  COLOSSUS  OF  TRUST. 

Not  Fostered  Exclusively  by  Protection  —  Free  Trade 
WOULD  Enlarge  the  Field  of  Operations  and  Increase 
THE  Evil  —  Trusts  Limit  Competition  in  the  Local 
Market  and  are  Amenable  to  State  Laws  —  Unre- 
quited Self-sacrifice  Exacted  by  Them. 


Paul:     What  are  trusts? 

Father:  A  trust  is  a  combination  of  men  in 
any  one  branch  of  business,  made  for  the  purpose 
of  controlling  the  market. 

Paul:     How  do  they  operate? 

Father:  If  I  understand  their  modus  operandi 
thoroughly,  it  is  that,  for  instance,  all  the  refiners  of 
sugar  in  the  United  States  "  pool  their  issues  "  so 
to  speak,  and  agree  upon  the  amount  of  stock  that 
shall  be  put  upon  the  market  and  the  price  thereof. 

Paul:  Well,  father,  you  say  that  you  are  a  free 
trader  in  theory  but  in  practice  as  an  American 
you  believe  in  a  protective  tariff.  Do  you  not 
think  the  tariff  fosters  the  formation  of  trusts? 

Father:  No,  I  do  not  think  that  trusts  are 
necessarily  the  result  of  the  true  protective  tariff, 
for  if  free  trade  were  ordained  to-day  the  same  self- 
interest   that    prompts    the  sugar    refiners  of    this 


TARIJ-F  AND    WAGES.  57 

country  to  combine  for  the  purpose  of  controlling 
the  American  market  would  operate  on  a  larger 
scale  and  you  might  find  the  sugar  refiners  and 
other  classes  of  manufacturers  combining  with  the 
same  classes  in  Great  Britain,  with  the  same 
results. 

Paul:  Do  you  not  think  that  trusts  are  an 
injury  to  business? 

Father:  Yes,  if  they  destroy  local  competition 
under  our  commercial  policy  and  crush  out  the 
small  dealer. 

Paul:  But  doesn't  the  protective  tariff  destroy 
competition?  You  say  it  is  ordained  for  the  pur- 
pose of  enabling  the  American  manufacturer  to 
be  developed,  when  you  admit  that  without  the 
tariff  the  English  producer  could  come  in  and  sell 
his  wares  much  cheaper  than  we  could  produce  them 
at  home. 

Father:  Yes,  I  did  say  that,  but  the  circum- 
stances are  entirely  different.  If  we  foster  com- 
petition on  the  free  trade  basis,  unless  all  the  world 
is  under  a  free  trade  policy  then  we  lose  all  the 
benefits  that  I  have  enumerated  as  coming  from  a 
diversity  of  interests  and  the  development  of  vary- 
ing capacities,  which  we  could  not  have  secured 
had  Great  Britain  been  allowed  to  enter  our  markets 
as  an  unimpeded  competitor.  The  protective  tariff 
renders  it  possible,  when  our  protected  manufacturer 
has  arrived  at  a  period  of   independence,  for  him 


58  TARIFF  AND    WAGES. 

to  carry  on  the  most  successful  competition  with  all 
foreign  rivals.  The  protective  tariff  for  the  time 
being  limits  competition  to  the  American  market 
with  the  American  competing.  A  trust,  however, 
limits  competition  /;/  the  market  over  which  it 
exerts  its  influence  to  the  detriment  of  all  com- 
petition. 

Paul:  But  if  free  trade  prevailed  wouldn't  it 
be  possible  for  us  to  defeat  these  trusts  by  so  letting 
in  the  foreign  competitor? 

Father:  No,  not  necessarily,  because  as  I  have 
said,  the  self-interest  which  leads  to  the  formation 
of  the  local  American  trust  by  American  capital 
could  lead  to  a  combination  extending  over  two 
countries  and  the  effects  would  be  the  same  or 
even  worse. 

Paul  :  But  you  assume  that  all  persons  engaged 
in  a  like  industry  would  corvi!o\x\0. 

Father:  Yes,  I  do  assume  that,  because  if  a 
trust  is  formed  it  is  formed  after  mature  delibera- 
tion and  those  who  do  not  come  in  are  "frozen 
out  "  of  business. 

Paul:  Is  there  no  way  in  which  this  cutting  off 
of  competition  in  the  local  market  can  be  pre- 
vented? 

Father:  Yes,  if  the  parties  who  form  such 
combinations  are  incorporated  under  the  laws  of 
a  state  the  body  from  which  they  receive  their 
incorporation  will  have  authority  to  regulate  and 


TARIFF  AND    WAGES.  59 

control  them.*  Trusts  organized  by  the  modern 
barons  of  plutocracy  should  be  made  to  feel  that 
they  are  responsible  to  the  people  and  that  they 
cannot  exact  a  sacrifice  for  iv/iich  they  give  no  suffi- 
cient return.  But  I  did  not  intend  to  discuss 
the  general  question  of  trusts.  I  simply  wanted  to 
answer  your  inquiry  and  to  assure  you  that  trusts 
are  not  tiecessarily  and  exclusively  a  sequence  of  a 
protective  tariff. 

*  Since  the  above  was  written  the  following  dispatch  appears  in  the 
Associate  Press  telegrams:  Alhaiiy,  N.  Y..,July  2. — Attorney  General 
Tabor  has  rendered  a  decision  in  the  case  of  the  North  River  Sugar 
Refinery  and  the  Sugar  Refineries  Company  to  the  effect  that  an  action 
may  be  brought  against  the  great  sugar  trusts.  A  violation  of  Section 
163  of  the  Penal  Code  was  charged  in  that  the  company  combined  with 
others  for  the  purpose  of  advancing  and  controlling  prices,  and  the 
Attorney  General  was  asked  to  bring  an  action  to  annul  the  existence 
of  the  corporation. 


PART     II.— Wages. 


CHAPTER    VIII. 

THE   WAGES    QUESTION. 

Relation  of  Wages  to  Commercial  Politics — The  Source 
OF  Wages  more  Prolific  in  a  New  Country  than  in 
an  old  one — Under  Foreign  Competition  Wages 
MUST  be  Lower  —  The  Evils  of  an  Adverse  Money 
Balance. 


Paul:  During  the  presidential  campaigns  the 
papers  are  full  of  statements  that  free  trade  would 
cut  down  wages,  and  that  protection  maintains 
high  wages.  What  is  your  candid  opinion  of  these 
statements? 

WAGES    DEPEND    ON     PRODUCTION. 

Father  :  If  there  is  no  production  there  can  be 
no  wages,  if  we  accept  Walker's  theory  that  wages 
are  paid  out  of  the  product  of  present  industry 
(Wages  Question,  page  12  seq.)  —  and  I  think  this 
theory  the  sound  one.  Therefore,  whatever  creates 
or  maintains  production  creates  or  maintains  wages. 
If  free  trade  in  England  creates  or  maintains  pro- 
duction better  than  protection  did,  then  in  Eng- 
land free  trade  is  the  better  friend  of  wages  earners. 
If  protection  in  America  creates  or  maintains  pro- 
duction better  than  free  trade  would,  then  protec- 
tion in  America   is  the  better  friend  of  the   wages 


TARIFF  AND    WAGES.  6i 

earners.  Opposite  theories  can  produce  the  same 
results  in  fields  where  circumstances  conspire  dif- 
ferently. If  we  were  to  get  upon  the  free  trade 
basis  in  this  country  now,  in  order  to  compete  at 
all  with  England  we  would  Jun'c  to  reduce  the  nomi- 
nal raages,  or  be  content  with  less  profit. 

Paul:  I  don't  see  why,  for,  by  removing  all 
tariff  duties  would  we  not  take  off  so  much  from 
materials  that  we  could  save  thereby  enough  in  the 
cost  of  production  so  that  we  would  not  have  to 
reduce  wages?  Free  trade  would,  I  think,  stimu- 
late production,  and  thereby  create  or  maintain 
wages.     Am  I  not  right? 

EQUIVALENCE    OF     CHANGES. 

Father:  By  removing  the  tariff,  we  would 
undoubtedly  in  some  things  reduce  the  cost  of  pro- 
duction so  far  as  materials  were  concerned.  But 
not  enough  to  overcome  the  superior  skill,  the 
greater  capital  and  the  better  transportation  facili- 
ties of  England.  Again,  by  removing  the  tariff, 
all  the  expenses  of  conducting  the  government  would 
have  to  be  met  by  internal  taxes,  which  would  of  course 
add  to  the  cost  of  the  necessities  of  life. 

WHEN    wages    must     BE    REDUCED. 

Take  some  illustrations: 

If  England  and  the  United  States  were  both  free 
traders  to-day,  and  if  both  had  equal  capital,  equal 


62  TARIFF  AND   WAGES. 

facilities,  equal  skill,  neither  would  have  the 
advantage  where  raw  materials  (raw  for  their  use) 
were  produced,  so  one  could  not  buy  these  materi- 
als cheaper  than  the  other.  Both  have  equal  skill 
and  equal  facilities  for  manufacturing,  both  enter 
an  open  market  to  sell  their  products.  It  is  plain 
that  on  square  dealing  neither  would  have  the 
advantage.  If  the  cost  of  production  could  not 
be  reduced  in  the  purchase  of  the  raw  material,  and 
if  greater  capital,  skill  and  facilities  could  not  be 
had,  then  reduction  of  profits  or  of  wages  tvould  be 
the  only  source  whence  one  nation  could  get  advantage 
over  the  other.  Then,  that  nation  would  gain  the 
advantage  which  could  secure  equally  serviceable 
workers  at  the  lowest  wages,  or  be  content  with  the 
smallest  profits,  and,  other  things  being  equal,  the 
older  nation  would  win  this  advantage,  because 
wages  are  lowest  in  the  oldest  country  whose  interests 
are  most  diversified  and  profits  are  also  generally 
lower.  That  is,  owing  to  the  greater  division  of 
labor  and  the  longer  practice  of  economy,  an  English 
workingman  could  make  what  is  equivalent  to  a 
dollar  a  day  go  further  than  an  American  work- 
ingman could,  and  English  capital  is  contented  with 
lower  profits. 

Much  less  labor  expended  on  land  will  produce  a 
dollar  in  a  neiu  country  than  can  produce  it  in  a  long- 
settled  country.,  and  what  labor  can  earn  from  land  is 
the  basis  of  wages  the  world  over,       JBut   if  the 


TARIFF  AXD    WAGES.  63 

American  competing  manufacturer  reduced  wages 
below  what  the  services  of  the  men  could  win  in 
other  kinds  of  work, — farming,  cattle  raising,  etc., 
etc.,  he  \^ow\(\.  force  them  out  of  vianufactiu-ing  into 
the  more  productive  eiiipioyments,  provided  there  was 
mobility  of  labor.  This  would  spoil  the  prospect  of 
successful  competition  with  England,  and  also 
unless  the  manufacturer  increased  wages  by  reduc- 
ing his  rate  of  profit,  production  in  America  must 
cease.  If,  moreover,  he  raised  wages,  competition 
would  be  out  of  the  question  and  manufacturing 
would  be  an  impossibility.  If  he  cut  down  his 
profits  in  manufacture,  capital  would  withdraw  into 
the  more  profitable  agriculture. 

RELATIVE    PURCHASING    POWER    OF    WAGES. 

But  again,  England  is  older,  living  (such  as  it  is) 
is  cheaper  there,  she  has  more  capital,  she  has  bet- 
ter working  facilities.  She  can  buy  foreign  pro- 
duced raw  material  as  cheaply  as  we  can,  her  home 
raw  material  is  as  cheap  as  we  can  produce  our 
home  raw  material  for  our  own  manufactures; 
therefore,  if  we  equal  her  at  all  in  the  cost  of  pro- 
duction we  must  do  it  by  scaling  our  7ciages  down 
to  the  purchasing  power  of  hers.  Then,  if  our 
goods  were  as  well  made  as  hers,  we  might  trust  to 
Yankee  enterprise  and  shrewdness  to  match  if  not 
to  beat  her  in  open  markets. 

In   all  discussion  of  wages,    my  son,   you  must 


64  TARIFF  AND    WAGES. 

always  remember  that,  if  the  foreign  workman  gets 
5^-.  a  day  and  the  American  $1.25  a  day,  they  are 
not  necessarily  on  a  wages  equality,  for  the  pur- 
chasing power  of  5^.  ($1.25)  in  the  older  country 
is  probably  considerably  greater  than  is  the  pur- 
chasing power  of  $1.25  (5^.)  in  the  newer  country, 
and  the  "necessities"  in  the  old  country  are  less 
and  cheaper  than  are  what  are  required  as  necessi- 
ties in  the  new  country.  //  is  Jiot  the  relation  of 
fwiniiial  rvages  that  7C>e  must  covipare.,  but  the  relative 
purchasing  power  of  wages.  Demagogues  and  one- 
sided politicians  carefully  evade  such  a  comparison 
when  by  so  doing  they  can  "make  a  point" 
before  an  unthinking  crowd. 

Paul:  You  say  reducing  wages  and  profits 
below  a  certain  point  would  force  American  work- 
men and  capital  into  farming,  cattle  raising  and 
other  employments.  What  effect  would  such 
destruction  of  American  manufacturing  interests 
have  on  these  other  employments? 

WHERE  THE  ENGLISH  FREE  TRADER  WOULD  PUT  US. 

Father  :  //  would  make  us  dependent  upon  the 
foreign  manufacturer^  anid  we  would  have  to  con- 
tent ourselves  with  pastoral  and  agricultural  life 
and  such  manufacturing  specialties  as  we  could 
create  (Cairnes  396,  istp. )  This  would  reduce 
diversity  of  interests,  there  would  soon  be  a  sur- 
plus of  farmers  and  farm  products,  and,  exchanges 


TARIFF  AXD    WAGES.  65 

being  free,  the  balance  of  trade.,  or  the  difference, 
which  has  to  be  settled  in  money,  would  probably 
always  be  against  its,  atid  that  joould  not  be  a  happy 
circumstance. 

Paul:  Why  not?  You  do  not  think  it  an  injury 
to  a  country  that  it  has  to  send  its  money  abroad, 
do  you? 

WHEN    THE    EXPORTING    OF    MONEY    IS    AN    INJURY. 

Father:  The  settling  of  exchange  balances  in 
money  is  not  objectionable  provided  that  it  is  done  with 
some  sort  of  equality  by  all  intcrtrading  nations.  For 
instance,  if  America  and  England  are  traders,  and 
England  sells  to  us  year  after  year  more  than  she 
buys,  we  will  be  continually  paying  her  a  money- 
balance,  and  after  awhile,  provided  we  do  not  in 
trade  with  other  countries  sell  them  more  than  we 
buy  and  thereby  reimburse  our  money  coffers,  we 
should  eventually  be  drained  of  our  circulating 
medium.  Like  as  the  farmer  who  owns  10,000 
acres  of  land  and  has  no  surplus  capital  is  "land 
poor,"  so, — even  though  having  the  equivalent  of 
the  money  sent  abroad, — we  would  be  embarrassed 
for  want  of  funds  with  which  to  transact  business. 
A  man  who  is  ahuays  exchanging  money  for  goods 
will  eventually  be  reduced  to  barter  or  financial 
embarrassment  of  goods. 

But  we  are  digressing  from  the  subject  of  wages 
and  must  return. 
c 


CHAPTER    IX. 

THE   DOCTRINE   OF  A   FIXED   WAGES   FUND. 

One  Formulated  in  Countries  where  the  Period  of 
Diminishing  Returns  has  been  Reached  —  A  Dismal 
AND  Unphilosophical  Doctrine — The  Theory  Stated 
and  Combated  —  Wages  Begins  and  Ends  in  Pro- 
duction. 


Paul:  What  do  you  think  of  the  so-called 
wages  fund  theory  once  held  by  J.  S.  Mill  and 
afterward  abandoned  by  him  and  now  advocated 
by  Prof.  Cairnes? 

Father:  1  have  read  Cairnes  with  a  good  deal 
of  interest,  and  before  discussing  the  wages  fund 
theory  it  will  be  best  to  state  it  as  briefly  as  possible. 

THE    THEORY    STATED. 

The  wages  fund  theorists  hold  that  wages  is  paid 
out  of  capital  —  not  out  of  the  products  of  present 
industry.  Hence  they  say  that  entering  into  pro- 
duction are  capital,  fixed  (that  is,  the  amount  put 
into  buildings,  machinery,  etc.)  circulating — (that 
used  for  purchasing  raw  material  and  labor),  and 
labor;  if  a  man  has  $100,000  to  invest  in  manu- 
facturing, he  finds  that  $60,000  must  be  fixed  in 
buildings,  machinery,  etc.,  leaving  $40,000  free  or 


TARIFF  AND    WAGES.  67 

circulating  with  which  to  purchase  raw  material 
and  labor.  Cairnes  holds  that  a  certain  amount, 
regulated  by  the  conditions  of  the  labor  market,  of 
this  free  capital,  will,  according  to  the  laws  govern- 
ing supply  and  demand,  go  toward  payment  of 
labor;  if  the  raw  material  costs  $15,000,  labor 
will  get  $25,000;  if  raw  material  costs  $25,000, 
labor  will  get  $15,000;  that  the  average  wages  of 
each  workman  will  be  found  by  dividing  the 
amount  set  apart  for  wages  by  the  number  of  wages 
workers  necessary  to  carry  on  the  business.  If  50 
men  are  required  they  would  each  average  1-50  of 
$25,000,  or  of  $15,000,  $500  or  $300  respectively. 
More  they  could  not  get  without  compelling  the 
manufacturer  to  convert  fixed  into  free  capital,  less 
they  could  not  get  without  compelling  the  manu- 
facturer to  convert  free  into  fixed  capital,  provided 
in  each  case  that  the  cost  of  raw  material  was  rela- 
tively the  same. 

Paul:  What  objections  have  you  to  this  theory? 
Does  it  not  seem  plausible? 

Father:  My  objections  to  the  theory  are  as 
follows:         •  • 

OBJECTIONS     TO    THE    THEORY. 

First:  I  do  not  think  wages  is  paid  out  of  the 
free  capital.  I  think  wages  begins  with  production 
and  ceases  when  production  ceases  and  is  paid  out 
of  the  product  of  current  industry. 


68  TARIFF  AND    WAGES. 

Second:  When  one  has  $100,000  to  invest  in 
manufacturing,  he  estimates  that  he  must  put  so 
much  into  buildings,  machinery,  etc.,  and  so  much 
into  materials  to  work  up  into  the  finished  product, 
and  so  much  as  a  reserve  to  keep  his  bank  credit 
good,  to  meet  unexpected  losses,  and  to  provide  for 
the  wear  and  tear  of  machinery,  insurance  on 
buildings,  etc.,  and  to  advance  from  circulating 
capital  for  the  payment  of  wages  bet^veen  the  date  at 
which  an  article  is  finished  and  the  date  at  which  it 
is  sold. 

When  he  reckons  on  the  article  he  is  to  produce, 
he  includes  in  his  cost  of  production,  {a)  the  cost 
of  the  raw  material,  [b)  the  waste  incident  in  manu- 
facturing, [c)  the  wear  and  tear  of  machinery,  [d) 
the  time  labor  will  have  to  expend  on  the  article 
to  finish  it,  {e)  the  money  that  its  time  is  worth  to 
labor,  (/)  the  interest  on  that  money  advanced 
from  free  capital  for  the  satisfaction  of  labor's 
time  for  the  period  between  the  completion  of  the 
article  and  its  sale,  and  {g)  finally  the  interest  and 
taxes,  insurance  and  so  forth,  on  the  whole  capital 
invested,  except  the  amount  advanced  from  free 
capital,  interest  on  which  has  been  looked  after. 

His  profits  then  are  the  amounts  he  gets  for  his 
perfected  article  over  and  above  these  seven  speci- 
fied elements  entering  into  the  cost  of  production. 

Third:  It  will  be  observed  that  every  function 
performed  by  free  capital  is   performed  only  under 


TARIFF  AND   WAGES.  69 

the  expectation  that  full  satisfaction  for  this  work 
will  be  met  when  the  cost  of  production  is  covered. 
If  satisfaction  is  not  rendered  in  this  way,  free 
capital  must  disappear.  It  acts  simply  as  an  agent, 
production  being  the  principal.  If  production 
ceases,  free  capital  cannot  longer  perform  its  func- 
tions. Hence  it  seems  to  me  that  present  produc- 
tion is  not  only  the  source  of  present  wages,  but  it 
is  also  the  source,  in  the  last  analysis,  of  the 
present  free  capital  associated  in  production. 
Under  such  circumstances  it  leads  only  to  confu- 
sion to  multiply  terms  on  this  subject, 

IT    IS    AN     AFTER-EVENT. 

The  manufacturer  then  considers  what  his  build- 
ing and  plant  will  cost  him,  what  his  product  will 
net  him,  and  what  funds  he  would  best  keep  in 
bank  to  maintain  credit  and  to  meet  expenses 
between  manufacture  and  sale.  So  far  as  there 
being  any  distinct  wages  fund,  any  more  than  there 
is  any  distinct  wages  fund,  or  any  distinct  raw 
materials  fund,  or  any  distinct  interest  and  insur- 
ance fund,  I  cannot  concede  it.  A  certain  amount 
of  money  created  by  production  is  expended  on 
each  account.  It  does  not  originate  in  capital 
though  advanced  by  it,  but  does  come  from  produc- 
tion. The  wages  of  employees  are  woX.  predetermined 
for  a  particular  time  by  an  absolute  law,  inevitable, 
irrevocable,  which  takes  no  account  of  circumstances. 


70  TARIFF  AND    WAGFS. 

If  production  is  profitable,  and  suitable  labor  is 
scarce,  wages  will  be  high.  If  production  is  profit- 
able and  suitable  labor  is  abundant,  wages  will  be 
lower,  but  in  that  case  the  wages  is  determined  for 
that  time,  not  by  the  amount  of  circulating  capital 
but  by  the  goods  labor  can  best  produce  under  the 
existing  demand.  Wages  in  all  respects  depends 
upon  production  for  what  it  is. 

A  manufacturer  cannot,  outside  the  law  of  sup- 
ply and  demand,  "set  apart"  any  definite  portion 
of  his  circulating  capital  to  the  payment  of  wages. 
He  cannot  know  what  he  will  have  to  pay  for 
wages  until  he  either  actually  attempts  to  employ 
labor,  or  until  he  has  made  inquiry  as  to  what  he 
can  get  the  required  labor  for.  Therefore,  it 
seems  to  me  that  if  there  is  any  "wages  fund,"  it 
is  the  total  amount  of  money  that  is  paid,  not  what 
MUST  be  paid  for  labor;  that  this  fund  is  an  effect 
not  a  cause;  that  it  is  dependent  on  the  supply  and 
demand  of  labor;  that  it  is  large  or  small  accord- 
ing to  the  condition  of  the  market  and  of  the 
labor, — that  in  short  it  is  the  cart  aftet'^  but  not 
before  t/ie  horse.  As  such  it  is  not  to  be  considered 
as  an  economic  "  law,"  for  it  is  not  a  law  of  force, 
it  is  at  most  only  an  event. 


CHAPTER    X. 

WHAT   IS   MEANT   BY   DIMINISHING    RETURNS. 

A  Demonstration  by  Tables  of  the  Absurdity  of  the 
SO-CALLED  Wages  Fund  Theory^ The  Foolishness 
OF  Applying  Foreign  Theories  to  American  Condi- 
tions OF  Life  —  Man's  Productiveness  Determines 
his  Wages. 


Our  circulating  capital  in  this  country  does  not 
begin  to  increase  proportionately  with  our  popula- 
tion, and  yet  wages  is  not  reduced  per  man,  either 
nominally  or  in  purchasing  power,  in  proportion  to 
this  relative  increase  of  population  over  capital, 
and  will  not,  before  we  reach  the  period  of  "  dimin- 
ishing returns." 

In  order  to  understand  this  matter  thoroughly  as 
respects  a  new  country,  I  must  explain  to  you  what 
is  called  the  theory  of  "diminishing  returns." 

THE    THEORY    OF      "DIMINISHING    RETURNS. 

In  such  a  country  five  men  settle  with  their  fami- 
lies upon  fifty  acres  of  land,  clear  it,  plant  it  and 
live  out  of  it.  From  time  to  time  other  men  join 
them  until  ten  men  are  operating  these  acres. 
These  ten  men  will  produce,  if  they  are  equally 
industrious  and  capable,  and  the  land  will  as  readily 


72  TARIFF  AXD    WAGES. 

respond  to  labor,  twice  as  much  as  the  five  men 
did,  but  by  and  by  the  Hmit  of  possible  propor- 
tionate increase  of  production  has  been  reached  on 
this  fifty  acres.  Then,  owing  to  more  or  less 
exhaustion  of  the  soil,  if  another  man  comes  into 
the  community  he  cannot  add  one-tenth  to  the  pro- 
duction from  this  land,  but  he  produces  something. 
It  may  be  one-fortieth  or  one-twentieth  as  much  as 
one  man  equally  industrious  and  capable  could  pro- 
duce in  the  earlier  years  of  the  farm's  history;  and 
in  this  case  whatever  he  produces  goes  to  the  credit 
of  the  production  of  the  farm.  Let  me  illustrate 
by  a-  table,  one  hundred  being  the  maximum  that 
can  be  produced  on  this  land : 

5       men 50  acres production     40 

10      men 50  acres production     80 

12^  men 50  acres production  100 

Now  we  have  reached  the  maximum  of  the  pos- 
sible proportionate  production  of  these  fifty  acres 
by  12)^  men.  Henceforward  we  meet  with  what 
we  call  "diminishing  returns." 

20  men 50  acres production  95 

30  men 50  acres production  90 

40  men 50  acres production  80 

50  men 50  acres production  50 

The  point  were  the  returns  are  said  to  diminish, 
—  that  is  where  one  man  can  no  longer  produce 
one-fifth  as  much  as  five  or  one-tenth  as  much  as 
ten,  —  is  reached  when  the  fifty  acres  of  ground  are 


TARIFF  AND   WAGES.  73 

cultivated  by  12^  men.  Now  then  we  can  add 
more  men  to  the  community  but  we  do  not  propor- 
tionately increase  the  production ;  yet  the  produc- 
tion is  increased  to  a  certain  amount,  as  will  be 
seen  by  the  table  above,  though  it  takes  as  the 
land  grows  older  fifty  men  to  produce  about  what 
originally  five  men  produced. 

This  is  in  brief  the  history  of  land  cultivation  in  all 
countries.  There  is  an  increase  in  the  labor  force 
and  decrease  in  the  relative  productiveness  of  the 
land,  and  of  course  an  accumulating  of  capital  to 
a  certain  point.  If  the  population  increases  much 
faster  than  capital  and  productive  opportunities 
do,  there  will  come  a  time  when  the  land  will  not 
sustain  the  people  on  it. 

In  a  new  country  where  we  find  limited  capital 
and  abundant  opportunities  for  labor,  immigrants 
are  invited ;  if  they  have  capital,  so  much  the  better. 
If  they  have  none  they  are  still  welcome  because 
the  country  is  so  fertile  that  in  a  short  time  they 
can  become  productive  factors  in  the  community, 
and  after  a  time  accumulate  and  add  to  the  fixed 
and  circulating  capital  of  the  land.  If  the  wages 
fund  theory  is  correct,  every  new  immigrant  would 
be  looked  upon  with  suspicion  by  the  inhabitants 
unless  he  brought  a  large  amount  of  capital  with 
him.  For  he  would  increase  the  divisor,  the  divi- 
dend remaining  the  same,  and  consequently  the 
average  wages  of    every  man    in    the    community 


74  TARIFF  AND    WAGES. 

would  be  cut  down  by  his  coming.  If  this  rule  is 
correct,  this  country  has  been  developed  directly  in 
opposition  to  it. 

As  I  have  stated  a  number  of  times  in  this  con- 
versation, the  circumstances  controlling  economic 
questions  in  this  new  country  are  entirely  different 
from  what  they  are  in  the  old  countries.  This 
7oages  fund  theory  was  spun  under  circumstances 
which  prevail  in  the  old  7vorld  under  circumstances 
of  '■''  diminishing  returns.'' 

Labor  is  in  the  market  like  any  other  exchange- 
able thing,  and  it  fluctuates  according  to  the  same 
laws  as  the  price  of  wheat  does,  and  not  according 
to  its  ratio  with  the  circulating  capital  in  the  land. 

Paul:  What  are  the  "  supply  "  and  "demand" 
of  which  you  speak  with  reference  to  labor? 

Father:  Demand  is  desire  for  production, 
present  or  contemplated,  inviting  an  exchange  of 
labor  and  wages.  Supply  is  labor  inviting  an 
exchange  of  wages  for  services  in  production. 

You  do  not  fully  understand  how  wages,  accord- 
ing to  the  wages  fund  theory,  is  affected  when  the 
period  of  diminishing  returns  is  reached?  Well, 
listen. 

Bear  this  in  mind:  The  luages  fund  theorists  hold 
that  all  the  circulating  capital  not  devoted  to  raia 
material.,  divided  by  all  the  wages  ^corkers,  gi7'es  7is 
for  the  time  being  the  fixed,  average  ivages.  Now., 
then,  for  an  examinafion  of  this  theory: 


TARIFF  AND    WAGES.  75 

I.  Let  me  present  a  table  in  which  cack  man 
brings  an  equal  amount  of  Ability  and  Capital: 

5  men,  50  acres,  production  40,  capital  $100.00 
10  men,  50  acres,  production  80,  capital  200.00 
12^  men,  50  acres,  production  100,  capital     250.00 

We  have  reached  the  fullest  possible  production, 
with  12^  men  on  50  acres  of  land,  and  the  capital 
each  man  has  put  in  is  $20,  or  $250.  Supposing 
$100  of  the  $250  is  fixed  —  in  implements,  horses, 
bonds,  etc.,  we  have  $150  to  divide  as  wages. 
Dividing  $150  by  12I/2  we  have  $12  as  the  wages 
each  averages.      Clear,  so  far,  is  it  not? 

II.  Well,  let  me  present  a  table  in  which  part  of 
the  men  bring  no  capital,  though  the  Skill  and 
Ability  of  each  are  Equal: 

5  men,  50  acres,  production  40,  capital  $100.00 
10  men,  50  acres,  production  80,  capital  180.00 
12^  men,  50  acres,  production  100,  capital    210.00 

If  the  same  part  of  the  capital  becomes  fixed  as 
before,  there  is  left  $110  to  divide  into  wages  for 
12)^  men,  giving  an  average  of  less  than  $9  to 
each.  The  man  without  capital  ought  surely  not 
to  be  welcomed  into  a  community  under  such  cir- 
cumstances if  the  wages  fund  theory  is  true,  ought 
he?  But,  you  notice,  the  12)^  men  still  get  the 
full  production  from  the  land,  although,  by  the 
table,  there  is  $20  less  of  capital  than  in  the  first 
case,  but  the  same  labor. 


76  TARIFF  AND    WAGES. 

Instead  of  getting  less,  however,  the  history  of 
this  country  will  show,  I  think,  that  until  the  point 
of  diminishing  returns  is  reached,  labor  gets  more 
rather  than  less  when  its  productive  power  is 
increased  by  added  strength. 

III.  Another  table  now,  showing  Equal  Capital  to 
each  and  unequal  ability  and  skill  /;/  labor: 

5  men,  50  acres,  production  40.  capital  $100.00 
10  men,  50  acres,  production  75,  capital  200.00 
I2_^  men,  50  acres,  production  92,  capital    250.00 

Now  we  have  12^  men  with  $250  capital,  fall- 
ing short  8  points  of  the  full  production  of  the  50 
acres.  Five  men  make  a  production  of  8  each, 
but  12^  men  are  averaging  only  7-36  or  what 
wY-z  men  ought  to  do.  Here  production  is 
reduced  by  incompetency  distributed  among  the 
last  7^  men,  and  yet,  according  to  the  wages  fund 
theory,  the  same  amount  of  wages  is  averaged  — 
/.  e.  $12  per  capita.,  because  the  number  of  wages 
workers  (12^)  dividing  $150,  makes  an  average 
of  $12  each! 

/  insist,  to  the  contrary,  that  each  man's  produc- 
tiveness as  a  works'  fixes  his  wages,  not  the  amoutit 
of  capital  he  does  or  does  not  contribute  to  the 
community. 

IV.  Again: 

5  men,  50  acres,  production  40,  capital  $100.00 
10  men,  50  acres,  production  75,  capital  210.00 
12^  men,  50  acres,  production  92,  capital    275.00 


TARIFF  AND    WAGES.  77 

Here  we  have  less  Industry  and  more  Capital. 
According  to  the  wages  fund  theory,  we  shall  have 
$175  instead  of  $150  to  divide,  giving  12^  men  — 
the  last  7/^  of  whom  are  inefficient  compared  with 
the  first  5, — $14  each!  Is  not  this  a  reduction  of 
the  theory  to  an  absurdity?  Less  Industry  (not  less 
labor)  more  Capital  and  greater  average  of  wages! 

Permit  me  to  renew  my  somewhat  iterated 
remark :  I  dissent  from  this  dismal  theory,  insisting 
that  wages  arises  from  production  and  not  from 
any  part  of  capital. 

V.  Let  the  table  be  continued  from  12^  on  to 
show  the  effect  in  the  period  of  ' '  diminishing  returns., ' ' 
in  which,  notwithstanding  the  decreased  propor- 
tionate returns  there  is  an  increase  of  capital,  both 
because  it  is  necessary  in  order  to  do  the  best 
farming,  and  because,  by  long  practice  of  economy 
there  is  a  greater  saving  every  year. 

20  men,  50  acres,  production  95,  capital  $    400.00 

40  men,  50  acres,  production  80,  capital     1,000.00 

50  men,  50  acres,  production  50,  capital    2,000.00 

60  men,  50  acres,  production  40,  capital    5,000.00 

Now  among  60  men  having  a  capital  of  $5,000, 
of  which  $3,000  is  devoted  to  wages,  we  have  an 
average  of  $50  per  capita  in  wages,  and  yet  these 
sixty  men  do  not  get  out  of  the  land  any  more  in 
the  aggregate  than  the  five  men  got  from  it.  Their 
wages,  however,  is  over  four  times  as  much  as  was 
averaged  by  the    first  five    settlers.      I    hold  that 


78  TARIFF  AND    WAGES. 

each  man  working  the  50  acres  would  be  robbing 
capital  if  he  took  more  as  wages  from  the  land 
than  he  produces  on  it.  In  this  condition  each 
man  adds  something  to  the  production  of  the  sixty, 
and  his  coming  does  not  of  necessity  cut  down 
by  one-sixtieth  the  wages  of  all  the  rest, 

VI.  If  we  have  50,000,000  people,  500,000,000 
acres,  each  producing  to  full  capacity,  and  a  circu- 
lating capital  of  $20,000,000,000,  of  which  $12,- 
000,000,000  constitutes  this  so-called  wages  fund, 
then  the  average  wages  will  be  $1,400. 

VII.  If  the  population  and  capital  are  the  same, 
and  production  has  diminished  one-half,  the  aver- 
age wages  is  still  $1,400,  according  to  the  fixed 
fund  theory, 

VIII.  If  population  doubles  and  capital  remains 
the  same,  whether  production  increases  or  decreases, 
according  to  this  theory  the  average  is  but  $700! 

The  wages  fund  theorists  as  stated  above  hold 
that  the  population  (wages  workers)  is  the  divisor, 
that  the  part  of  circulating  capital  left  after  the 
raw  material  is  purchased  is  the  dividend,  and  by 
dividing  the  latter  by  the  former  the  average  of 
wages  for  the  time  being  is  found.  They  do  not 
give  production  any  representation  in  this  example 
in  common  division.  The  thing  seems  absurd  to 
me,  very!     I  believe  the  sound  theory  is  the  one 


TARIFF  AND    WAGES.  79 

that  I  have  stated,  that  wages  begins  in,  rises,  falls 
and  ceases  with  production. 

IX.  The  rule  in  a  progressive  country  is,  increase 
of  population  and  capital,  decrease  of  wages  and 
interest,  and  decrease  in  the  proportionate  (but  not 
in  the  aggregate)  productiveness  of  land.  What  a 
man  can  earn  by  labor  on  land,  in  the  last  analysis, 
is  the  base  line  of  the  current  rate  of  wages,  for,  if 
free  to  act,  he  will  not  accept  as  wages  less  from 
any  industry  than  he  can  wrest  from  nature  by 
tillage  of  the  soil.  Hence,  we  find  in  old  coun- 
tries, wages,  having  a  lower  base  line  to  start  from, 
average  lower,  other  things  being  equal,  than  in  a 
new  country,  where  nature  is  very  generous  to 
requite  even  easy  toil,  and  where,  consequently, 
the  standard  of  wages  is  high.  Here  again,  you 
see,  it  is  what  a  man  can  produce  in  this,  that  or 
the  other  industry  that  determines  his  wages,  and 
not  any  so-called  wages  fund. 


CHAPTER    XI. 

THE  TWO   THEORIES   DEMONSTRATED. 

The  Fallacy  of  the  Wages  Fund  Theory  Set  Forth  in 
A  Table — How  Wages,  Dependent  on  Production, 
VARY  with  it. 


Father:  I  have  put  what  I  think  is  a  demon- 
stration of  the  fallacy  of  the  wages  fund  theory 
into  tabular  form.  In  looking  over  this  table 
please  remember  that  whenever  I  have  doubled  the 
labor  on  the  50  acres,  I  have  had  to  add  something 
to  the  fixed  capital,  as  more  implements,  etc.,  are 
required  for  say  ten  men  than  five,  presumably 
twice  as  many  provided  they  are  all  used  at  the 
same  time ;  but  by  doubling  the  labor  we  are  able 
the  better  to  subdivide  the  work  so  that  all  shall 
not  be  doing  the  same  kind  of  work  at  the  same 
time,  and  hence  will  not  want  double  the  imple- 
ments. For  this  reason,  where  labor  is  doubled  I 
add  only  50  per  cent,  (see  VI.  table  I.)  to  the 
amount  of  capital  fixed  in  farm  implements.  When 
five  men,  however,  double  production,  I  increase 
by  50  per  cent,  the  capital  fixed  in  implements  (see 
II.  in  table  I.),  for  it  is  evident  that  five  men  can- 
not double  production  without  increasing  facilities 
somewhat. 


TARIFF  AND    WAGES.  8i 

I  include,  in  fixed  capital  on  the  farm,  the  imple- 
ments, tools,  teams,  wagons,  etc.,  and  then  as 
only  seed  is  raw  material,  it  is  so  small  an  item  that 
I  do  not  separate  it.  Furthermore,  for  the  sake  of 
simplifying  the  discussion,  I  assume  that  title  to 
the  50  acres  has  been  secured  by  conquest,  pre- 
emption or  squatter  sovereignty.  Therefore  all 
capital  is  used  for  implements,  etc.,  and  for  advanc- 
ing wages. 

In  the  first  exhibit  wages  is  a  sort  of  dog  u?idcr 
the  master  s  table  which  takes  what  is  left  after 
every  other  demand  is  satisfied.  In  the  exhibit  I 
propose,  wages  eats  at  the  table  with  the  master  and 
shares  the  best  of  every  course ! 

Now  study  these  two  exhibits.  They  will  bear 
a  good  bit  of  comparison  and  investigation  in  con- 
nection with  our  previous  discussions  of  this  matter: 


82 


TARIFF  AND    WAGES. 


I. 

WAGES,   ACCORDING   TO  THE  WAGES  FUND  THEORY, 
INDEPENDENT     OF    PRODUCTION. 


u 

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XIII 

50     " 

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8 

XIV 

5§ 

(7.  With  deficiency  of  capital  I  assume  they  could  put  less 
into  implements,  etc. 

/>.  The  further  one  gets  from  the  period  of  maximum 
production,  the  more  of  capital  must  go  into  machines, 
implements,  etc.,  to  secure  even  the  production  that  is 
obtained. 


TARIFF  AND    WAGES. 


83 


II. 

Now  for  a  demonstration,  by  table,  of  the  counter 
theory : 

WAGES    AS    DEPENDENT    ON    PRODUCTION. 


•d 

£ 

c 

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0 

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C  iJ 

11  . 

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5  Men 

50 

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$6.     ■ 

2 

5     " 

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80 

16 

100 

65 

52 

10.40 

Progressive 

3 

5     " 

50 

100 

20 

100 

60 

60 

12. 

Production. 

4 

10    " 

50 

80 

8 

200 

60 

48 

4.80 

5 

10    " 

50 

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10 

200 

60 

60 

6. 

6 

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50 

100 

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4- 

.Max.  Prod'tion 

7 
8 

20     " 
40     " 

50 
50 

95 
80 

4.75 
2 

400 
1000 

45 
40 

43 
32 

2.1S 
.80 

Dim.  Returns. 

9 

50     " 

50 

50 

I 

1000 

30 

15 

•30 

) 

This  exhibit  is  true,  relatively,  whatever  the  con- 
ditions of  supply  and  demand  for  goods  or  grain 
may  be.  I  have  graduated  the  per  cent,  of  wages 
to  production  from  75  per  cent,  to  30.  I  fancy 
that  I  have  put  it  too  high — but  this  is  immaterial 
— the  table  illustrates  relations. 

In  this  table  you  can  very  readily  see  how  pro- 
ductive power,  regardless  of  capital  at  cofnmand^ 
plays  hide  and  seek  with  wages.  For  instance  ( No. 
4),  labor  -is  abundant,  and  so  is  capital,  but  it  is 
not  the  most  productive  kind  of  labor,  hence  wages 


84  TARIFF  AND    WAGES. 

is  low,  $4.80.  Again  (  No.  3),  labor  is  scarce,  but 
it  is  of  the  highest  grade,  producing  the  maximum, 
and  we  have,  as  might  be  expected,  the  highest 
wages.  In  No.  9,  labor  is  abundant,  very  abundant, 
capital  is  very  plentiful,  production  is  at  the  lowest 
ebb,  and,  as  seems  proper,  wages  is  on  the  rock. 

My  son,  I  leave  these  tables  with  you  for  your 
consideration.  I  have  spent  more  time  on  this 
subject  than  I  intended,  but  the  wages  fund  theory 
makes  such  a  dismal  science  of  political  economy 
that  I  feel  as  if  I  ought  to  expose  its  fallacies  to  you. 


CHAPTER  XII. 

THE  TARIFF,  SUBSIDIES  AND  BOUNTIES. 

Tariff  Duties  Paid  by  the  Well-to-do  —  Internal  Rev- 
enue Paid  by  the  Wages  Earners — Power  to  Tax 
Unlimited  —  Tariff  more  Direct  and  Preferable  to 
Subsidies  and  Bounties  —  Growth  of  "  Fair  Trade" 
Sentiment  in  Great  Britain  —  Ruinous  Belgian  Com- 
petition —  Comparative  English  and  Massachusetts 
Wages. 


Paul:  The  protective  tariff  is  a  tax,  plus  interest 
thereon,  which  is  eventually  paid  by  the  consumer. 
This  you  admit? 

Father:  Yes,  and  our  internal  revenue  taxes 
axe  paid  by  the  consumer^  though  many  of  them  are 
so  disguised  that  the  consumer  is  not  conscious  that  he 
is  contributing  unto  Ccesar. 

Paul:  Has  the  government  the  right  to  levy 
taxes  except  for  revenue? 

Father:  That  right  has  been  exercised  since 
1789  in  this  country  as  a  function  of  the  general 
government. 

Paul:  Can  government  tax  a  thing  out  of 
existence? 

Father:  The  theory  is  that  the  power  to  tax, 
if  it  exist  at  all,  is  unlimited.  I  do  not  like  this 
view  of  it.      It    is    a    dangerous    prerogative,   this 


86  TARIFF  AND    WAGES. 

power  to  tax  unto  death,  but  it  must  be  admitted 
that  when  you  concede  that  the  government  has  a 
right  to  tax  for  other  purposes  than  for  revenue, 
you  place  no  limitation  to  that  power — the  only 
limitation,  if  it  may  be  so  called,  residing  in 
the  discretion  of  the  law-making  and  law-confirm- 
ing powers. 

WHY    A    TARIFF    IS    PREFERABLE   TO    SUBSIDIES    AND 
BOUNTIES. 

Our  government  from  the  first  was  committed  to 
protection  and  it  adopted  a  tariff  therefor  instead 
of  subsidies  and  bounties,  and  I  am  inclined  to 
think  that  a  judicious  tariff  distributes  advantages 
better  than  would  bounties  and  subsidies  such  as 
Great  Britain  extends  to  many  of  her  favorite 
industries.  These  too  are  taxes  paid  by  the  con- 
sumer and  theoretically  are  open  to  quite  as  many 
objections  from  a  free  trade  standpoint  as  are 
protective  duties.  The  more  direct  taxation  is, 
the  less  inequalities  prevail.  A  protective  tariff  is 
paid  by  tJie  tueii-to-do  classes  who  will  import  what 
they  want  at  whatever  cost;  whereas  internal  rev- 
enue is  an  indirect  tax  which  is  paid  by  the  7uages 
earners  as  a  matter  of  necessity.  In  this  country 
we  get  the  bulk  of  our  revenue  from  the  tariff;  *  in 
Great  Britain  there   is  no  tariff  except  on  spirits, 


*  For   year  ending    July    i,  1887,  the   customs  duties   receipts   were 
$217,286,893  and  the  internal  revenue  receipts  $118,823,391. 


TARIFF  AND    IV AGES.  87 

tobacco,  tea,  coffee,  and  a  few  such  articles, 
the  bulk  of  the  expenses  of  government  being 
raised  by  the  indirect  inland  revenue  tax  which 
almost  nothing  escapes.  As  the  tariff  therefore 
comes  out  of  the  pockets  of  the  rich  and 
extravagant  and  is  more  direct  than  would  be  sub- 
sidies and  bounties,  to  which  all  the  people  would, 
by  the  indirect  taxation  of  internal  revenue,  con- 
tribute, and  which  would  be  much  higher  were  this 
form  of  governmental  assistance  the  rule,  I  think  the 
true  protective  tariff  works  less  injustice  and  is  easier 
borne  than  any  other  accepted  form  of  assistance. 

FAIR    TRADE    SENTIMENT. 

Great  Britain,  you  see,  is  not  an  absolutely  free 
trade  country  because  she  levies  duties  on  certain 
articles  and  always  puts  a  higher  duty  on  the  manu- 
factured article  than  on  the  raw  material^  thus 
practicing  the  very  essence  of  protection ;  and  there 
is  a  strong  sentiment  developing  among  her 
manufacturers  in  favor  of  what  they  call  "fair 
trade,"  that  is,  trade  protected  by  duties  when 
necessary,  for  the  English  manufacturer  is  often 
underbid  in  his  own  territory  on  work  in 
which  he  has  been  reputed  to  excel,  by  Bel- 
gian manufacturers,  who  can  compete  with  him 
successfully  because  wages  are  lower  in  Belgium 
than  they  ari  in  England.  Sir  George  Elliot,  M.  P., 
one  of  the  largest  coal  miners  and  iron  manufac- 


88  TARIFF  AND    WAGES. 

turers  of  Great  Britain,  told  me  that  his  own  class 
of  manufacturers  was  underbid  by  Belgian  iron 
men  on  the  contract  for  one  of  the  largest  railway 
stations  in  England,  and  secured  the  job,  and  such 
instances  are  multiplying  every  day.  They  empha- 
size the  lesson  that  there  is  reason  and  common 
sense  in  a  fair  trade  or  protective  policy  when  in 
an  unqualified  free  trade  policy  there  may  be  ruin- 
ous competition  from  abroad.  I  did  not  intend  to 
quote  any  statistics,  but  to  show  you  how  much 
lower  relative  wages  are  in  England  and  Massa- 
chusetts let  me  read  you  the  following:  "In  the 
fall  of  1883,"  says  Carroll  D.  Wright,  Commissioner 
of  Massachusetts,  "we  started  upon  an  original 
investigation  through  personal  agents  of  the  bureau, 
in  Massachusetts  and  Great  Britain,  and  through 
these  agents  we  have  gathered  from  original 
sources  (meaning  by  original  sources  the  pay-rolls 
of  great  manufacturing  establishments,  the  official 
wages  lists  agreed  upon  in  England,  so  far  as  Eng- 
land is  concerned,  between  trade  societies  and 
employers,  and  from  other  reliable  sources)  the 
rate  of  wages  paid  in  the  following  twenty-four 
industries  which  are  common  to  Massachusetts 
and  Great  Britain : 


TARIFF  AND   WAGES. 


89 


KATE    OF    WAGES    PAID    IN    INDUSTRIES    COMMON 
TO    MASSACHUSETTS    AND    GREAT    BRITAIN. 


Industries,  18 


Agricultural    implements 

Artisans'    tools 

Boots  and  shoes 

Bricks 

Building  trades 

Carpetings 

Carriages  and  wagons 

Clothing 

Cotton  goods 

Flax  and  jute  goods 

Food  preparations 

Furniture 

Glass 

Hats —  fur,  wool  and  silk 

Hosiery .... 

Liquors,  malt  and  distilled 

Machines  and  machinery 

Metals  and  metallic  goods 

Printing  and    publishing 

Printing,   dyeing,   bleaching,   and  finishing 

cotton  textiles 

Stone 

Wooden  goods 

Woolen  goods 

Worsted  goods 


All  industries  average 


General 

Averapc 

Weekly  Wages 

Paid  to  all  Em- 

ployees 

Massa- 

Great 

chusetts. 

Britain. 

$10.25 

$8.85 

11.80 

4.89 

11.63 

4-37 

8.63 

4.16 

14.99 

7.21 

6.08 

4.11 

13.80 

4.89 

10.01 

6.71 

6.45 

4.66 

6.46 

2.84 

9.81 

2.72 

1 1. 04 

7.96 

12.28 

6.94 

II. 01 

5-51 

6.49 

4.67 

12.87 

12.66 

11.75 

6-93 

11.25 

7.40 

11.37 

5-52 

8.67 

4.94 

14-39 

8.58 

12.19 

5.67 

6.90 

4.86 

7-32 

3.60 

$10.31 


5.86 


By  this  comparison  you  will  observe  that  were 
free  trade  established  between  Great  Britain  and 


go  TARIFF  AND    WAGES. 

Massachusetts,  the  former,  in  the  matter  of  the 
wages  alone  of  the  industries  named,  would  have 
a  tremendous  competing  advantage  over  the  old 
Bay  State,  noiun't/istaiidiiig  the  fact  that  American 
labor  is  from  25  to  '^■^Yi  per  cent,  more  productive  than 
any  foreign  labor.  As  wages  are  somewhat  lower  in 
Massachusetts  than  they  are  in  the  entire  United 
States,  the  result  would  be  more  disastrous  to  the 
entire  country  than  with  Massachusetts. 


PART    III. 

Capital,  Labor,  Strikes,  Arbitration,  Profit 
Sharing,  etc.,  etc. 


CHAPTER    XIII. 

RELATIONS  BETWEEN  CAPITAL  AND  LABOR. 

Definitions  —  Trade  Organizations  Justifiable — "Takes 
Two  TO  Make  a  Bargain"  —  Alienations  that  are 
Foolish  —  A  Duel — Material  Interests  are  Safe  in 
THE  Hands  of  Honest  Workingmen. 


Paul:  If  you  are  so  disposed,  father,  I  would 
like  to  discuss  the  question  of  the  relations  of  capi- 
tal and  labor.  We  hear  a  good  deal  about  antago- 
nism existing  between  them  —  a  sort  of  "  irrepres- 
sible conflict,"  and  many  people  look  forward,  I 
am  told,  to  the  future  of  these  relations  with  no 
small  apprehension. 

Father:  What  is  capital?  What  is  labor? 
These  questions  first  require  an  answer.  Financial 
capital  is  profit  of  production  reserved  for  future 
production.  Labor  is  the  service  which  capital 
must  have  in  order  to  secure  further  production. 

EXPERIENCE,    ETC.,    NOT    CAPITAL. 

Some  writers  and  thinkers  use  the  term  capital 
somewhat  loosely,  I  think,  when  they  speak  of  a 


92  TARIFF  AND    WAGES. 

literary  man's  intellectual  ability  and  the  expert's 
acumen  as  capital.  I  do  not  so  regard  them. 
They  probably  belong  to  the  department  of  skilled 
labor  —  their  possession  enhances  the  value  of  the 
literary  man's  work  and  the  expert's  services,  but 
they  can  scarcely  be  called  capital  because  they  are 
not  tangible ;  they  cannot  be  taxed ;  they  cannot  be 
loaned  to  another  for  monetary  consideration ;  they 
are  not  impaired  or  enhanced  by  changes  in  com- 
mercial conditions.  They  are  of  no  value  without 
the  stimulus  of  financial  capital.  Like  labor,  unless 
demanded  by  capital,  they  do  not  yield  any  return 
to  the  possessor. 

In  all  economic  discussion,  we  greatly  simplify 
matters  by  simply  defining  our  terms,  and  there- 
fore I  exclude  intelligence,  skill,  experience,  etc., 
from  the  domain  of  capital  and  place  them  in  the 
category  of  labor 

CAPITAL  THE  CHILD  OF   LABOR   AND  INTELLIGENCE. 

Capital  is  an  accumulation  of  property  or  funds 
resulting  from  past  labor  and  intelligence  —  liter- 
ally a  son  of  sorrow  and  toil.  It  is  the  organiza- 
tion of  commercial  force.  The  purpose  of  its 
organization  is  to  increase  itself.  As  it  is  born  of 
intelligent  labor,  it  cannot  grow  without  the  assist- 
ance of  labor.  Capital  that  is  unproductive  soon 
disappears — it  feeds  on  its  own  vitals.  Further- 
more we  must  not  forget  that  capital  is  organized 


TARIFF  AND   WAGES.  93 

on  the  purely  selfish  basis  like  every  other  human 
commercial  force.  It  is  always  looking  out  for 
"  Number  One,"  and  must  necessarily  do  so  else 
it  would  soon  disappear  from  the  earth. 

Paul:  Would  this  be  a  calamity?  Is  not  the 
organization  of  capital  a  menace? 

Father:  It  would  indeed  be  a  calamity  if 
capital  were  swept  from  the  earth  because  then 
labor  would  be  reduced  to  beggary — and  beggary 
which  would  cry  aloud  in  vain,  for  there  would 
be  no  hand  to  help,  no  arm  to  save.  Better  the 
deluge,  wherein  all  might  perish  at  once,  than 
such  a  catastrophe! 

Yes,  the  tendency  of  capital,  just  as  the  tendency 
of  democracy,  is  towards  centralization  of  power, 
and  irresponsibility,  but  it  is  amenable  to  public 
opinion  and  can  be  held  in  check. 

ORGANIZATIONS    OF    CAPITAL    AND    LABOR. 

Now  then,  for  illustrations:  In  our  primitive 
community,  a  capital  of  $100,000  was  collected  for 
the  plow  works  and  negotiations  were  opened  for 
services  of  needed  labor.  It  is  plain  that  capital 
must  pay  labor  fully  as  much  as  labor  could  obtain 
from  any  other  employment  it  could  find.  If  the 
only  other  occupation  of  the  people  was  agricul- 
ture, capital  must  reward  the  services  of  labor  to 
the  same  extent,  —  either  by  money  or  its  equiva- 
lent  in   more  agreeable  kinds  of  work  —  that  the 


94  TARIFF  AND   WAGES. 

same  amount  of  intelligence  and  skill  devoted  to 
agriculture  would  produce.  If  the  demand  for  the 
labor  it  wanted  exceeded  the  supply  of  such  labor, 
capital  would  have  to  pay  a  larger  amount  in  order 
to  induce  labor  to  offer  desired  service.  If  such 
service  was  very  scarce,  of  course  the  extra  wages 
inducement  would  increase  the  cost  of  production, 
which  must  be  met  either  by  charging,  if  possible, 
a  higher  price  for  the  plows,  or  capital  must  be 
content  with  a  smaller  per  centum  of  profit. 

In  the  earlier  history  of  capital  associated  for 
manufacture,  labor  is  scarce  and  is  able  to  drive 
a  better  bargain  for  its  services,  and  unless  later 
on  labor  organizes  itself  as  capital  has  done,  the 
tendency  of  time  is  to  make  labor  more  dependent 
and  capital  more  dictatorial. 

Mark  me,  my  son,  neither  labor  nor  capital  can, 
by  organization  alone,  increase  its  relative  value. 
Organization  can  simply  render  them  more  certain 
against  imposition  for  one  reason:  "//  takes  hvo 
to  make  a  bargain  "y  and  I  insist  upon  it  that  the  capi- 
talist alone  is  not  to  be  trusted  alivays  to  do  exact 
justice  by  labor.  Furthermore,  labor  is  not  qualified 
to  estimate  exactly  its  value  to  capital.  We  cannot 
take  it  for  granted  that  without  some  sort  of  compul- 
sion men  will  be  just  and  square  witJi  their  fellows, 
whether  they  are  capitalists  or  laborers. 

Paul:  Then  I  suppose  you  believe  in  the  thou- 
sand and  one  organizations  of  workingmen? 


TARIFF  AND   WAGES.  95 


TRADE    ORGANIZATIONS    LEGITIMATE. 

Father  :  Certainly  I  do  so  far  as  these  organ- 
izations are  formed  for  the  purpose  of  resisting  the 
tendency  of  capital  to  become  unjustifiably  dicta- 
torial and  irresponsible.  They  have  a  good  reason 
for  existence  but  it  requires  a  very  great  degree  of 
wisdom  in  their  management  to  restrain  them  from 
extreme  atid  unjustifiable  proceedings — a  tendency 
which  is  very  great  because  there  are  many  times 
when  labor  in  adversity  gets  desperate,  when  it 
hears  the  howl  of  the  wolf  of  hunger  not  afar  off. 
Labor  has  rights  which  capital  is  bound  to  respect., 
and  it  is  because  capital  has  not  respected  these 
rights  as  tenderly  as  it  ought  to  have  done,  it  is 
because  capital  has  organized  sometimes  for  pro- 
tection and  sometimes  for  aggression  that  organiza- 
tions of  labor  have  sprung  into  being.  Capital., 
too.,  has  rights  which  labor  is  bound  to  respect.  They 
have  mutual  interests  inside  and  outside  the  bound- 
aries of  their  "inalienable  rights,"  and  when  they 
both  recognize  and  respect  these  rights,  the  appar- 
ent conflict  between  them  becomes  a  sort  of  individual 
affair  —  not  a  positive  hostility  between  the  two  great 
commercial  divisions  of  mankind. 

The  self-seeking  meddlers  on  both  sides  are 
responsible,  chiefly,  for  the  wrangles  that  do  occur. 
But  to  illustrate  by  a  little  — 


96  TARIFF  AND    WAGES. 


FANCY    SKETCH    OF    A    DUEL. 

John  Honest  and  Henry  Caput  had  grown  up 
together  as  boys.  Both  had  sprung  from  obscure 
parentage,  and  neither  was  able  to  tell  the  fate  of 
the  father  or  mother.  Occasional  stories  had  come 
to  their  ears  that  they  were  related  to  each  other, 
but  the  evidence  was  so  cloudy  that  they  paid  no 
attention  to  it.  As  children  they  were  devoted  to 
each  other,  but  as  they  grew  up  they  showed  a  dis- 
position towards  what  was  at  first  friendly  rivalry 
in  sports  and  employments.  They  were  of  equal 
height  and  people  often  remarked  that  "  they  look 
near  enough  alike  to  be  brothers."  John  became 
a  shoemaker  in  his  native  place  and  was  as  honest 
as  the  day.  While  his  education  was  limited  his 
common  sense  was  strong  and  he  was  looked  upon 
as  a  leader  among  his  fellows  and  was  at  the  head 
of  the  labor  society  of  the  town. 

Henry,  when  he  became  of  age,  sought  his 
fortune  in  California  gold  mines,  and  after  years  of 
hardships  and  suffering  returned  to  his  native 
town  a  rich  man.  He  soon  acquired  elegant  tastes, 
drove  nice  horses,  was  fond  of  the  good  things  of 
life,  and  yet  withal  was  a  generous  friend  of  the 
charities  and  benevolences  of  his  native  town  and 
gave  large  amounts  of  money  to  beautify  and 
adorn  it. 


TARIFF  AXD    WAGES.  97 

He  had  many  fawning  courtiers  about  him,  un- 
thinking, unreasonable  men,  one  of  whom  sought 
to  poison  his  mind  against  his  old  friend  John 
Honest,  who  he  said  was  circulating  evil  reports 
about  him  and  organizing  his  friends  to  prevent 
him  from  gaining  any  success  in  his  future  financial 
efforts.  Busybodies  on  the  other  side  poisoned 
John's  mind  against  Henry,  and  these  old  friends 
became  sworn  enemies. 

One  day  they  met  on  the  public  street,  hot  words 
were  exchanged  —  John  calling  Henry  a  thief  and 
a  robber  and  Henry  intimating  that  John  was  a 
coward  and  a  sneak. 

A  challenge  followed. 

To  nerve  each  man  for  the  contest,  the  seconds 
shaved  off  their  beards,  and  daubed  their  faces 
with  lampblack,  fearing  that  the  old  associations 
of  friendship  would  unman  them  unless  they  were 
disguised,  and  prevent  the  ''satisfaction"  each 
sought  in  gore. 

The  fatal  day  came.  The  men  stood  before 
each  other  for  the  word,  great  beads  of  sweat 
pouring  down  their  faces  obscuring  their  sight. 
Each  simultaneously  wiped  with  his  arm  his  sweaty 
face, —  the  daubs  went  with  the  sweat! 

The  beardless  faces  thus  uncovered  were  the 
faces  of  the  boys  of  twenty  years  ago  —  boys  who 
had  loved  each  other. 

The  duel  incontinently  ended. 


98  TARIFF  AND    WAGES. 

The  next  week  an  old  and  toil-worn  man  came 
to  the  town  and  through  him  it  was  learned  be- 
yond a  doubt  that  John  and  Henry  were  brothers! 

And  so  it  is  the  busybodies,  the  lazy  good-for- 
nothings,  the  scandal-mongers,  the  incendiaries, 
who  are  seeking  to  involve  John  Labor  and  Henry 
Capital  in  conflict  —  they  who  are  sons  of  the  same 
parents,  who  spent  their  youth  together,  and  whose 
manhood,  whatever  their  circumstances,  should  be 
one  of  amity  and  mutual  respect. 

Evils  move  along  the  line  of  least  resistance, 
and  because  capital  has  so  long  been  organized 
and  labor  has  so  long  scattered  its  forces,  capital 
has  gradually  begun  to  think  itself  greater  than 
everything  else  in  society  and  irresponsible  —  an 
error  which  the  organization  of  labor  will  undoubt- 
edly correct  by  a  counter  influence  on  public  opin- 
ion. To  get  this  influence,  labor  must  be  wise, 
conservative  and  just  in  all  its  doings  and  demands. 

Paul:  Are  the  relations  between  organized 
capital  and  organized  labor  amicable  ? 

Father:  I  think  each  is  suspicious  of  the 
other.  For  years  labor  was  in  abject  subjection 
unto  capital,  and  is  so  in  some  of  the  older  coun- 
tries to-day.  In  England  when  labor  began  to 
combine  into  trades  unions  against  the  influence 
of  dictatorial  capital,  the  organizations  were  out- 
lawed. This  was  a  false  step — it  was  overreach- 
ing  and   of    course  it  drove   the  members  of  the 


7\4KIFF  AXD    WAGES.  99 

unions  to  excesses  which  probably  would  never 
otherwise  have  been  committed.  The  very  fact  of 
the  organization,  of  these  unions  would  be  proof  to 
the  social  economist  that  there  was  a  good  reason 
for  their  evolution,  but  like  all  checks  to  tyranny, 
they  met  with  a  baptism  of  fire  and  persecution. 
Their  function  was  desired,  and  their  excesses 
would  not  have  been  committed  had  they  not  been 
confronted  with  a  hostile  public  opinion  created  in 
a  large  measure  by  organized  capital. 

A    HEALTHFUL    EVOLUTION. 

Since  1870  trades  unionism  has  flourished  in  the 
United  States.  In  1877,  some  fiery  spirits  brought 
some  discredit  on  the  organizations,  but  I  believe 
when  they  cling  simply  to  their  "inalienable  rights" 
of  self-defense  against  oppression ;  when  they  over- 
come any  tendency  to  interfere  with  those  who 
do  not  act  in  unison  with  them ;  when  they  rely 
entirely  upon  the  justness  of  their  cause  rather  than 
upon  the  un-American  "boycott,"  they  are  in  har- 
mony with  the  spirit  of  American  institutions;  that, 
conducted  with  prudence,  they  have  and  deserve 
public  countenance,  and  that  they  can  be  of  very 
material  benefit  to  the  trades  whose  interests  they 
seek  to  serve. 

SAFEGUARDS    AGAINST    ANARCHISTS. 

In  my  opinion  they  are  the  very  best  safeguards 
we  have  against  anarchists  who  threaten  such  dire- 


loo  TARIFF  AND    WAGES. 

ful  things.  Our  interests  can  be  in  no  safer  hands 
than  in  the  hands  of  the  honest,  intelligent,  liberty- 
loving  American  workingmen.  I  do  not  believe  that 
they  can  be  used  by  plotters  against  the  public  peace. 
Their  membership  is  made  up  of  the  bone  and  sinew 
of  the  country,  of  the  strong,  common-sensible  people, 
who  have  the  wisdom  to  resist  as  well  the  attempt 
of  terrorists  to  use  them,  as  of  the  other  extreme 
to  abuse  them  and  traduce  their  motives  and  acts. 
I  have  no  fear  of  them  —  I  have  infinitely  more 
fear  of  the  out-of-sight  organizations  of  men  who 
despise  public  opinion  and  who  by  bribery  and 
corruption  seek  to  ride  roughshod  over  the  rights  of 
the  people. 

The  process  of  evolution  has  not  yet  given  us, 
perhaps,  an  ideal  trades  unionism,  but  the  future 
will  disclose  it,  and  when  all  present  crudities  and 
malformed  features  are  removed,  we  shall  find  in 
these  organizations  an  element  of  very  desirable 
politicg-social  strength.  Confidence  and  mutual 
respect  will  succeed  suspicion,  and  organized  capi- 
tal and  organized  labor  will  be  rivals  but  not  of 
necessity  enemies.  Each  will  get  all  it  can  out  of 
the  bargain  which  it  negotiates. 

ULTIMATE    GC^OD    FROM    STRIKES. 

Paul:     Then  I  suppose  you  approve  of  strikes? 

Father:     Not   necessarily.      The    spirit  which 

has  caused  strikes  has  its  root  in  a  defense  of  rights, 


TARIFF  AXD    WAGES.  loi 

but  unless  one  knows  all  the  circumstances  of  the 
case,  one  can  pronounce  no  definite  opinion  on  the 
merit  of  individual  proceedings. 

It  cannot  be  denied  that  fear  of  a  strike  against 
injustice  has  a  salutary  influence  against  undue 
greed  on  the  part  of  capital,  and  though  the  pres- 
ent effect  of  a  "strike"  maybe  disastrous,  I  do 
not  doubt  that  needed  material  good  is  evolved 
from  it. 

ARBITRATION    COMMENDED. 

Yes,  my  son,  I  would  strongly  recommend  arbi- 
tration.    The  same  or  a  better  result  is  reached  by 

it  and  both  labor  and  capital  suffer  less  loss. 


CHAPTER   XIV. 

LABOR   AND   CAPITAL   SHARING    PROFITS. 

Salutary  Results  of  this  form  of  Co-operation —  Stimu- 
lating Manful  Self-interest  on  Behalf  of  Capital. 


Paul:  What  further  can  you  suggest  in  the 
way  of  bringing  capital  and  labor  into  more  inti- 
mate relations?  I  have  no  doubt,  as  you  say,  that 
their  interests  are  mutual,  but  they  do  not  seem  to 
be  at  all  tender  of  each  other.  I  may  be  young 
and  shortsighted,  but  I  rather  like  the  manufacturer 
so  closely  described  in  "John  Halifax,  Gentle- 
man." It  seems  to  me  that  more  such  characters 
ought  to  be  met  with  in  daily  life.  Do  you  not 
think  well  of  co-operation? 

Father:  Co-operation  in  the  purchase  of  the 
necessities  of  life  seems  to  be  satisfactory  when 
fully  tried.  Individuals  are  thus  given  the  benefit 
of  wholesale  rates  plus  the  expenses  of  manage- 
ment, and  I  approve  it.  Co-operation  in  manu- 
facturing is  not  so  simple,  nor  is  it  I  fancy  so 
satisfactory.  If  fifty  men  put  together  all  the 
capital  they  can  raise  and  go  into  the  manufacture 
of  plows  I  doubt  very  much  if  they  will  succeed 
as  well  as  would  a  single  firm  of  one  or  two  per- 
sons in  the  conduct  of  the  business. 


TARIFF  AND    WAGFS.  103 

Business  like  an  army  must  have  a  head  and 
competent  subordinates  to  take  advantage  of  all 
the  points  which  an  ever-changing  market  presents. 
Of  course  a  co-operative  concern  can  put  its  affairs 
into  the  hands  of  one  or  two  or  three  executives 
but  even  then  I  doubt  if  there  is  the  element  of 
stability  and  continuity  of  a  prudent  policy  in 
them  that  we  expect  to  find  in  private  centralized 
firms  and  companies. 

PROFIT     SHARING    AMONG    WAGES    EARNERS. 

Personally  I  think  very  highly  of  the  plan  of 
capital  giving  labor  a  per  centum  of  its  profits  over 
and  above  a  certain  stipulated  figure.  This  plan 
enlists  one's  self-interest  as  no  other  known  plan 
does,  and  you  will  find,  my  son,  that  there  is  noth- 
ing which  so  interests  a  workingman  in  his  employ- 
ment as  the  idea  or  hope  of  a  proprietary  share  in 
the  success  of  his  employers.  Under  such  a  plan 
the  men  are  more  hopeful;  they  look  forward  to  a 
future  of  some  promise;  they  feel  —  they  know — 
their  employer's  interests  are  also  their  own.  I 
wonder  why  this  plan  is  not  more  generally  adopted. 

Paul:     Is  this  plan  successful  when  tried? 

Father:  I  am  told  that  it  is.  Many  large  job- 
bing houses  in  the  country  have  adopted  it,  and 
even  when  they  have  put  their  desired  profit  at  a 
high  figure,  it  is  said  that  the  zeal  inspired  in  the 
beneficiaries  of  the  plan  has  been  so  great  that  this 


I04  TARIFF  AND    WAGES. 

profit  has  been  realized  and  a  large  amount  in 
addition  secured  for  division  among  the  percentum 
employees.  Under  this  plan  the  employees  share 
in  the  profits  above  a  certain  figure — say  15  per 
cent.  —  but  they  do  not  bear  their  share  of  the 
losses  which  are  sometimes  heavy  and  inevitable 
spite  of  the  wisest  management.  But  I  dare  say  that 
the  firm  practicing  this  sort  of  business  will  seldom 
—  it  ought  never  to  —  meet  with  any  opposition  if 
a  reduction  of  wages  or  a  cessation  of  production 
is  found  necessary. 

Paul:  Do  you  think  that  all  the  labor  employed 
should  be  a  beneficiary  under  this  plan? 

Father:  I  think  an  interest  in  profits  should 
surely  be  given  to  those  whose  fidelity  and  worth 
have  been  shown  in  extended  service.  I  am  satis- 
fied, however,  that  if  the  plan  were  extended  even 
to  all  the  labor  employed,  it  would  yield  the  most 
satisfactory  returns,  and  establish  relations  between 
capital  and  labor  that  would  be  in  the  highest 
degree  beneficial. 

Paul:  But  would  not  this  plan  necessarily  pre- 
suppose a  lower  rate  of  wages  in  an  establishment 
conducted  on  the  division  of  profits? 

Father:     Not  necessarily. 

Paul:  Would  not  the  part  divided  with  labor 
necessarily  come  out  of  the  pockets  of  capital? 

Father:  No,  not  unless  you  can  show  beyond 
a  doubt  that  without  such  a  division  or  distribution 


TA  RIFF  A  ND    I VA  GFS.  i  o  5 

capital  would  gain  as  much  as  or  more  than  it  does 
under  it.  I  think  this  could  not  be  proved,  for  the 
reason  stated  above.  Better  and  more  faithful  ser- 
vice is  stimulated  by  the  limited  partnership  plan ; 
capital  gets  the  degree  of  profit  it  desires  and  the 
employees  secure  all  the  surplus  their  energy  can 
gain  for  the  concern.  Wages,  moreover,  being 
paid  for  from  the  products  of  present  industry,  if 
this  plan  promotes  productiveness  of  labor,  and 
the  market  for  the  wares  made  remains  good,  wages 
ought  to  be  higher  and  better  assured  under  what 
I  may  call  this  limited  partnership  plan. 


CHAPTER   XV. 
COMPARATIVE   STATISTICS. 

The  United  States  Leads  all  Competitors  in  Manu- 
factures, Wealth,  etc. —  Sixty-six  Per  Cent,  of 
Population  Diverted  into  Productive  Industries  — 
Under  a  Free  Trade  Policy  England  would  use  us 
as  a  Surplus  Market  —  Tariff  Matters  Must  be 
Regulated  by  Good  Business  Sagacity  and  Common 
Sense. 

Father:  Figures  sometimes  are  more  eloquent 
than  all  theories.  It  may  be  well,  therefore,  to 
show  some  of  the  results  of  economic  policies  prac- 
ticed by  different  nations.  I  give  first  the  total 
manufactures  of  the  leading  nations,  in  1880: 

United  States $4,440,000,000 

Great  Britain 3, 790,000,000 

France 2,425,000,000 

Germany 2, 135,000,000 

Russia 1,145,000,000 

Austria 1,030,000,000 

Italy 575,000,000 

The  United  States  leads  the  world  in  manufac- 
tures, with  free  trade  (free  trade  since  1846)  Eng- 
land her  next  competitor,  the  other  nations  prac- 
ticing a  protective  policy.  The  value  of  the  total 
industrial  or  manufactured  products  is : 

United    States $10,395,000,000 

Great    Britain    10,120,000,000 

France 6,625,000.000 


TA  RIFF  A  A  'D   I VA  GES. 


107 


German}- 6,345,000,000 

Russia 4,300,000,900 

Austria 3,285,000,000 

Italy 1,895,000,000 

Here,  too,  the  United  States  leads  all  the  rest. 

The  following  table  shows  how  splendidly,  up  to 

1880,  the  United  States  had  forged  ahead: 


S 
^ 

0 
S 
0 
u 

c 

Debt. 

Net  Wealth. 

United  States 

Great  Britain 

France 

Germany 

847,475 
43,600 
40, 300 
31,615 
21,715 
18,065 

11,755 

$7,100 
6.235 
4,852 
4,250 
3,800 
3,010 

1,450 

$1,842 
3,845 
4,555 
1,145 
2,765 
2,095 
2,610 

$45,633 
39,755 
35.745 
30,470 
18,940 
15,970 
9,145 

Russia            

Austria 

Italy 

These  figures  represent  billions.  Here,  too,  the 
United  States  leads  all  the  rest  of  the  world  in 
wealth  and  income.  The  average  wealth  a  head  in 
the  United  States,  in  1880,  was  about  $8.70;  in 
Great  Britain  it  was  about  $9.  70. 

To  show  how  our  laboring  force  has  been  dis- 
tributed: we  had  in  1880  a  total  laboring  popula- 
tion of  17,392,099,  divided  according  to  vocation  as 
follows : 

In  agriculture 7,670,493,  or  44  per  cent. 

In  professional  and  personal.  ..  .4,074,238,  or  23^  " 
In  trades  and  transportation.  .  .  .1,8x0,256,  or  10^  " 
In     manufacturing,    mining    and 

mechanics 3,837,112,  or  22       "     " 


loS  TARIFF  A  AD    WAGES. 

This  shows  that  under  the  economic  poHcy — the 
protective — 66  per  cent,  of  our  worlcing  people 
have  been  diverted  from  the  tillage  of  the  soil  to 
other  industries. 

RESULTS,     NOT    PROOFS. 

None  of  these  tables  prove  that  protection  is  a 
better  policy  for  the  United  States  than  free  trade, 
but  they  do  show  that  under  a  protective  policy  we 
lead  the  world  in  total  manufactures,  in  total 
wealth,  in  the  value  of  total  manufactured  or  in- 
dustrial products,  and  that  wonderful  and  desirable 
diversity  of  employments  have  attended  us  in  our 
national  development.  The  free  trader  may  say 
that  it  does  not  follow  that  even  better  results  would 
not  have  followed  had  the  free  trade  policy  been  pur- 
sued, which  I  may  admit,  though  I  doubt  it.  Eng- 
land has  always  been  an  aggressive  commercial  power 
and  has  always  usurped  every  local  market  the  world 
over  as  her  own  by  a  sort  of  divine  right  unless 
the  local  market  has  resisted  her  assumptions.  So 
aggressive  has  been  her  crowding  usurping  func- 
tion in  this  particular  that  her  own  colonies  all  over 
the  world  have  been  compelled  to  bar  her  out  of 
their  markets  by  tariffs  that  she  has  not  been  able  to 
override.  She  always  pursued  this  policy  towards 
this  country  when  we  were  in  the  colonial  period, 
and  if  she  had  had  her  own  way  in  shaping  our 
economic  policy  after  we  gained  our  independence. 


TARIFF  AXD    WAGES.  109 

she  would  bave  robbed  us  of  the  substantial  fruits 
of  self-reliant  commercial  and  industrial  independ- 
ence by  insisting  that  this  country  was  naturally 
an  agricultural  and  pastoral  country,  that  it  should 
cling  to  its  "heaven-designed  mission"  and  buy 
its  manufactures  of  her  own  natural  and  best 
equipped  artisans  and  mechanics.  In  the  period 
from  1784  to  1790,  without  protection,  the  balance 
of  trade  against  us  and  in  favor  of  England  was 
over  $50,000,000.  From  1795  ^o  1801,  under  a 
protective  policy,  the  balance  of  trade  in  our  favor 
and  against  Great  Britain  was  about  $90,000,000, 
a  reversal  of  $140,000,000. 

Paul:  Yes,  but  did  not  this  extra  taxation  of 
our  own  people  check  our  own  material  progress  ? 

Father:  Not  demonstrably.  We  paid  the  ex- 
tra price,  and  thanks  to  the  stimulus  given  to  the 
erection  of  new  industries,  we  were  able  to  do  so 
and  have  a  handsome  margin,  in  the  bargain. 

Paul:  If  free  trade  were  made  the  American 
policy  to-day  and  we  had  for  example  1,000  inde- 
pendent industries  and  250  dependent  industries, 
all  having  competitors  in  England,  could  England 
probably  undersell  us  in  our  own  markets  after 
bringing  her  products  3,000  miles? 

Father:     Yes. 

Paul:     As  respects  our  independent  industries? 

Father:  Yes,  sir,  as  respects  all  of  them  if 
she  was  disposed  so  to  do. 


no  TARIFF  AND    WAGES. 

Paul:  Then  what  is  the  use  of  protection,  if, 
as  you  say,  she  could  undersell  our  manufacturers 
that  we  had  protected  to  the  point  of  so-called 
independence? 

A    SURPLUS    MARKET     FOR    ENGLAND. 

Father:  That's  a  close  question,  and  well 
asked.  It  brings  up  just  the  very  point  that  I  want 
to  discuss  for  a  few  minutes.  It  doesn't  follow 
that  she  could  always  undersell  our  manufacturers 
that  had  been  protected  up  to  the  point  of  inde- 
pendence. But  if  her  home  and  Indian  and  other 
exclusive  markets  were  good,  she  would  use  the 
United  States  if  need  be  for  a  dumping  ground  for 
her  surplus  products  in  this  way:  She  could  manu- 
facture $2,000,000  worth  of  steel  rails,  say,  cheaper 
than  she  could  $1,000,000  worth.  If  she  could 
dispose  of  $1,500,000  worth  or  more  at  a  good 
profit,  say  10  per  cent,  in  all  her  other  accessible 
markets,  she  could  afford  to  sell  her  surplus  in 
the  United  States  at  one  per  cent,  profit,  or  even 
at  cost,  yes  and  a  trifle  below  cost,  for  in  that 
event  she  would  make  an  average  profit  of  10  per 
cent,  less  what  she  might  throw  off  the  surplus  in  the 
American  market.  Of  course  this  would  paralyze 
any  American  steel  rail  manufactures.  Carry  this 
mere  imaginary  illustration  through  the  entire  line 
of  competition,  and  you  can  readily  see  how  the 
American  market  would  soon  be  in   utter  depend- 


TAKJFF  AND    WAGES.  iii 

ence  upon  the  schemes  of  the  British  manufacturer. 
The  result  would  be  an  immediate  destruction  of 
production,  a  vast  superabundance  of  labor,  a  low- 
ering and  cutting  off  of  wages  and  the  prostration 
of  the  country. 

Paul:  But  couldn't  our  manufacturers  play  the 
same  game  and  carry  the  war  into  the  English 
markets? 

Father:  No,  not  unless  we  had  the  same 
capacity  for  cheap  production,  the  same  rate  of 
wages,  were  content  with  the  same  scale  of 
profits  and  had  the  same  means  of  ready  and 
cheap  transportation.  Most  of  these  elements  we 
would  never  possess  until  like  her  we  had  passed 
the  point  of  diminishing  returns,  and  labor  ex- 
pended on  land  produced  no  greater  results  here 
than  there,  for  what  labor  expended  in  the  cultiva- 
tion of  land  can  produce  is  the  standard  of  wages 
the  world  over.  It  produces  most  in  the  newest 
and  least  densely-settled  country,  and  hence  wages 
must  be  higher  in  the  United  States  than  in  Eng- 
land, the  profits  of  business  must  therefore  be 
higher  unless  we  can  gain  compensating  advan- 
tages in  greater  industry  and  better  machinery. 
This  possibility  however  would  be  cut  off  if  Great 
Britain  were  allowed  to  use  us  for  her  surplus 
market. 

A    TARIFF      FOREVER? 

Paul:     Accordingly,  you  would   always  have  to 


001  120  471    6  '^  irAGES. 


maintain  a  tariff  if  there  were  any  probability  tiiat 
we  would  become  the  surplus  market? 

Father:  We  must  always  regulate  our  econ- 
omic policy  by  the  rivalries  which  we  have  to  meet. 
It  would  never  do  to  adopt  any  sort  of  economic 
policy  that  ignored  destructive  competition.  As  a 
nation  we  must  exercise  the  same  sagacity  that  we 
do  as  individuals,  shape  our  policy  to  the  circum- 
stances in  which  we  are  placed,  and  in  every 
emergency  see  to  it  that  if  we  cannot  gain  in  other 
respects  compensating  or  retaliatory  advantages, 
we  must  not  open  our  ports  indiscriminately  to 
foreigners. 

Paul:  If  the  whole  world  were  practicing  free 
trade  would  we  not  still  be  in  danger  of  becoming 
the  surplus  market? 

Father:  The  field  of  free  operation  being  so 
much  larger,  and  the  older  countries  of  Europe 
possessing  so  many  coequal  advantages  with  Great 
Britain,  she  would  not  command  undisputed  so 
many  markets,  and  her  average  profits  would  be 
so  reduced  that  she  could  not  afford  to  sell  to  us 
at  such  low  prices. 


"  Each  industry  is  entitled  to  protection  for  what  it  is  worth  to  the 
community,  for  if  Louisiana,  for  instance,  cannot  produce  sugar  of  suf- 
ficient quality  and  quantity  to  supply  the  country,  the  price  of  what  she 
can  produce  would  be  a  check  upon  the  price  of  the  foreign  product, 
which  would  not  sell  at  a  higher  figure  than  what  the  Louisiana  sugar 
could  be  produced  for.'' 


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